Gamuda (BUY) - Tunnelling through

Gamuda (BUY)

Tunnelling through

• In MRT Corp’s press release yesterday, MMC-Gamuda JV (50:50 stake) has been awarded the 9.5km underground tunnelling works and seven underground stations for the Sungai Buloh-Kajang MRT line for RM8.2bn.
• Replenishment success… With the latest award, Gamuda has successfully replenished its outstanding order book by an additional RM4.1bn (after adjusting for its 50% stake), bringing its total outstanding order book to ~RM6.1bn, translating to 3.3x FY11’s construction order book and has removed lingering concern on the company’s dwindling order book.
• 15.9 sen/share… By assuming a PAT margin of 8%, the tunnelling contract is worth ~15.9 sen/share for Gamuda.
• Earlier than expected… We are encouraged by the increasing momentum in which MRT Corp has been expediting the contract awards.
• Circle line next… By securing this tunnelling contract, we believe that MMC-Gamuda JV now stands a higher chance in securing additional tunnelling works for the next MRT line which is known as the Circle line.
• Maintain BUY as Gamuda has successfully secured both MRT tunnelling contract and the PDP role. Potential catalyst for Gemas-Johor EDTP project.

Source: HLIB Research 21 March 2012