Gamuda erases losses amid downgrades on weaker property sales

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KUALA LUMPUR (Dec 17): Gamuda Bhd erased losses after falling as much as 0.8% earlier on analyst downgrades. The earnings and target share price downgrades were subsequent to builder and property developer Gamuda's first quarter earnings report to Bursa Malaysia yesterday.

Today, Gamuda shares increased three sen or 0.6% to RM4.83 at 10:28 am after falling as much as four sen to RM4.76.

Yesterday, Gamuda said net profit rose 12% to RM185.85 million in the first quarter ended October 31, 2014 (1QFY15) from RM165.48 million a year earlier.

Revenue for 1QFY15 improved to RM569.64 million from RM486.12 million. Gamuda declared an interim dividend of six sen per share.

Today, TA Securities Holdings Bhd wrote in a note while Gamuda's 1QFY15 income was within expectation, TA had reduced its FY15 to FY17 earnings forecast for Gamuda by 7% to 7.6%.  

TA also cut its target price for Gamuda shares to RM4.81. This compares to RM5.17 previously, according to TA , which maintained its “sell” call on the stock.

According to TA, it had downgraded its Gamuda earnings forecast in anticipation of lower property sales.

"Its property sales slumped to RM240mn. Unbilled sales dropped to RM1.5bn from RM1.7bn a quarter ago.

"We cut our property sales assumptions for FY15/FY16/FY17 from RM1.84bn/RM1.65bn/RM1.7bn to RM1.0bn/RM1.2bn/RM1.3bn in line with the weaker-than-expected property sales," TA said.

TA also noted that besides Gamuda’s project delivery partner role in Malaysia's mass rapid transit (MRT) project, Gamuda had only one construction project in hand.

According to TA, Gamuda has an outstanding order book of RM1.8 billion, which could last until 2016.

“Should there be any delay in KVMRT (Klang Valley MRT) line 2 or lack of new construction project awards, we foresee an earnings gap in construction division in FY16. This may pose downside risks to the share price,” TA said.