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clock 08-11-2017
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Gamuda Shares Drop on Possible Build and Finance for MRT3

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KUALA LUMPUR: Gamuda Bhd 's share price fell to a low of RM4.73 on Tuesday on expectations the infrastructure company might not be in the running for the Mass Rapid Transit 3 (MRT3).

At 4.50pm, it was down 27 sen to RM4.80. There were 37 million shares done.

The FBM KLCI rose 6.74 points or 0.39% to 1,749.03.

AmInvestment Bank Research is maintaining its forecasts, sum-of-parts based fair value of RM5.95 and buy call on news that MRT Corp has indeed decided to carry out MRT3, not by the project delivery partner (PDP) model used for MRT1 and MRT2, but via 'build and finance' by a turnkey contractor.

"Given that the turnkey contractor will have to fund 'not less than 90% of the expected project cost (of RM35bil to RM40bil)', we believe the race has narrowed down to only Chinese and Japanese contractors, who have backing from their governments to provide soft loans for infrastructure in developing countries" it said.

AmInvest Research said its FV values Gamuda's construction business at 16 CY18 net profit, in line with our benchmark one-year forward price-to-earnings of 14-16 times for large-cap construction stocks.

However, on a more positive note, Gamuda is confident that it will still likely to secure the tunnelling package of MRT3.

"We take comfort that Gamuda's roles in MRT3 are potentially only reduced, but not eliminated following the latest development" it said.


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