Stocks With Momentum: Gamuda

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Gamuda Bhd
G
AMUDA, Malaysia’s largest listed construction company with a market capitalization of RM11.6 billion, is set to be a major beneficiary of the country’s increased infrastructure spending works.

Indeed, it is shaping out to be the biggest beneficiary of the MRT 2 and LRT 3 projects. On Wednesday, Gamuda announced that it had received a letter from Mass Rapid Transit Corporation Sdn Bhd appointing a joint venture company to be established between MMC Corporation and Gamuda as the Project Delivery Partner (PDP) for the implementation of the KVMRT: Sungai Buloh – Serdang – Putrajaya Line/Line 2 Project.

The company has carved a niche in transportation infrastructure projects when it became the Project Delivery Partner (PDP) for the nation’s largest public infrastructure project, 51 km MRT project connecting Sungai Buloh to Kajang.

Other recent major projects undertaken by the company include the SMART tunnel in Malaysia; the Kaohsiung Metropolitan Mass Rapid Transit (KMRT) in Taiwan; Sitra Causeway Bridges in Bahrain; Dukhan Highway and New Doha International Airport (NDIA) in Qatar; Durgapur and Panagarh-Palsit Expressways in India, as well as Gamuda City and Celadon City in Vietnam.

Key earnings growth drivers for the stock include likelihood of increasing its order book by securing the estimated RM5 billion underground tunneling jobs and bagging the PDP role in RM27 billion Penang Transport Master Plan project.

Over the past five years, revenue increased from RM2.7 billion in FY July 2009 to RM3.9 billion in FY2013, while net profit rose from RM204.2 million to RM541.4 million. During that period, its total assets increased from RM5.9 billion to RM9.8 billion.

Gamuda has a modest gearing of 29.4%. In FY2013, the company paid dividends of 12 sen per share which translates into a yield of 2.34%. The stock is currently trading at 2.1 times book and a trailing 12-month P/E of 16.1 times.

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This article first appeared in The Edge Financial Daily, on October 31, 2014.