GAMUDA (5398) GAMUDA BHD
KUALA LUMPUR: CIMB Equities Research is upbeat on Gamuda Bhd after the company and MMC Corp were appointed joint venture partners to build the Mass Rapid Transit Line 2 from Sungai Buloh to Serdang and Putrajaya.
Gamuda received a letter from MRT Corp appointing the MMC-Gamuda JV as project development partner (PDP) for MRT 2.
“This news is a big positive and solidifies Gamuda’s position as the biggest beneficiary of the project, with a stronger chance of bagging the underground works.
“Imputing the DCF value of the PDP agreement may raise our RNAV by 3-4% but we retain our numbers pending formalisation of the PDP terms in the next three to four months,” it said on Thursday.
CIMB Research said its RNAV-based target price remains pegged to a 10% discount. It expects the share price to continue its steady rerating on the back of this news and positive expectations for a recovery in the water takeover talks.
If Gamuda is granted PDP fees of 6% for MRT 2 (similar to MRT 1), this translates to RM900mil in total PDP fees derived from the estimated RM15bil value of above-ground works to be realised over a 4-5 year period.
CIMB Research said this news also raises Gamuda’s chances of bagging the estimated RM5bil underground/tunnelling works (50% JV share), which is likely to be up for tender in 2H15, and awarded thereafter.
The finalised structure and terms of the PDP will be ironed out over the next three to four months, and we expect a more detailed announcement in 1Q15. Assuming similar PDP terms with MRT 1, the DCF value of the MRT 2 PDP could raise RNAV by 3%-4%.
CIMB Research said the appointment of the PDP is one of the two key events for MRT 2 before the tender phase, with the other being the official Cabinet approval, expected in the short-term.
“The share price has recovered of late, up 4% after the overall market sell-down. We expect a continued steady rerating on the back of this news, and also positive expectations of renewed talks on the water takeover side, particularly after the new Selangor chief minister took office,” it said.
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