KUALA LUMPUR (June 24): Affin Hwang Capital Research has downgraded Gamuda Bhd to “Hold” at RM3.83 with a higher target price of RM4.08 (from RM3.70) and said Gamuda has received an offer from the Ministry of Finance (MOF) acquire its toll highway stakes for an equity value of RM2.36 billion.
In a note today, the research house said the offer price is 16% below its DCF valuation of RM2.8 billion, which is a negative surprise.
“However, we are neutral on the deal as we believe MOF’s market-driven approach reduces government policy risks for concession companies and augurs well for Gamuda to participate in future Public-Private Partnership (PPP) projects.
“We downgrade our call to Hold from Buy with lifted RNAV-based target price (TP) of RM4.08 as the share price saw strong outperformance.
“We gather that Gamuda intends to utilise the cash proceeds of RM2.36 billion or 96 sen share to pay a meaningful special dividend and reinvest the balance in potential new projects, eg, the Penang Transports Master Plan (PTMP). Assuming a payout of 30-70% of the cash proceeds from the disposal, potential net yield is 7.5-17.5% in FY20E,” it said.