This article first appeared in The Edge Financial Daily on January 6, 2020

Gamuda Bhd
(Jan 3, RM4.07)
Maintain neutral with an unchanged target price of RM3.70: On Dec 30, 2019, Gamuda Bhd together with Dong-Pi Construction Co Ltd, a Taiwan company, received a Notice of Award from Port of Keelung, Taiwan International Ports Corp Ltd, a Taiwan state-owned port operation company, for a seawall project.

An unincorporated joint venture (JV) company was previously formed to undertake the job, in which Gamuda and Dong-Pi hold 70% and 30% stakes respectively. We understand that the job scope involves the: i) construction and completion of 4.014km of seawall structures; ii) dismantling of existing seawall structures which is 954 metres; and iii) Southport shore protection works, for a contract sum of approximately RM932.5 million. It is worth noting that the scheduled completion is within 60 months, from January 2020 to January 2025.

This JV provides earnings visibility for the next five years. As a result, it is expected to contribute positively to the revenue and earnings of the group beginning from the financial year ending July 31, 2020 (FY20).

Our estimates remain intact. Post announcement, we make no adjustments to our FY20/FY21 forecasts as the job value falls within the range of our contract replenishment assumptions. — MIDF Research, Jan 3