kimeng: 27 mar Gamuda (buy)

Earnings and dividends no surprise
EPS for H108 was 8.9sen (+48% Y/Y), meeting our forecast of 18sen for FY08. There was broad-based improvement in performances of construction, property and toll/water concessions. Construction rebounded with a vengeance, with 59% higher turnover and more than 200% higher profits, due to sharp margin recovery to 10% in H108 from 4.4% in H107, in the absence of provisions for the Dukhan Highway in Qatar. The property division saw 3% lower sales but profits improved 83%, thanks to claw-back of cost provision and positive sentiment for the sector that helped Gamuda to rake in new sales of RM350m. The concessions grew profits by 25%, thanks to effect of toll hike for and higher stake at Lebuh Raya Damansara-Puchong and growing profits from water concessions. No dividend was declared for the quarter.

BUY maintained; target price of RM3.70
BUY retained, with a reduced target price of RM3.70, valuing the stock on FY09 PER of 12x, consistent with market average. Gamuda offers a very decent dividend of 8%, based on guided normal dividend of 25sen. Share price however could stay range-bound for awhile as investors keenly await delivery of promises, since confidence on the stock was spooked by recent share sale by the Managing Director.