Analysts see Penang’s transport master plan as catalyst for Gamuda

KUALA LUMPUR: The appointment of the Gamuda Bhd-led consortium as the project delivery partner (PDP) for the RM27 billion transport master plan (TMP) by the Penang state government will be a major catalyst for the stock, which has declined by 14.17% year to date, underperforming the FBM KLCI, which fell 9.34% during the same period, said analysts.

TA Securities senior analyst Ooi Beng Hooi is of the view that the TMP project will provide earnings visibility for Gamuda in the medium term.  “However, details of the project have not been revealed yet, so it’s difficult to forecast the financial impact of the project,” he told digitaledge Daily.

He also noted that the TMP project may have a long gestation period, as part of the payment to the PDP could be in the form of land swaps or land reclamation rights. 

As such, he doesn’t see any earnings contribution from the TMP project as yet, keeping his earnings forecasts for Gamuda. However, Ooi has upgraded his rating on Gamuda’s stock to “buy” from “sell”, as well as raised his target price to RM4.91 from RM4.78.

CIMB Investment Bank Bhd senior analyst Sharizan Rosely also sees Gamuda’s involvement in the TMP project contributing positively to its financial performance, representing a major upside catalyst for the stock. “Gamuda still offers a strong play on order book growth and diminishing political risks for its water asset divestment. In 2016, its order book could surge more than fourfold, overtaking IJM Corp Bhd’s RM7 billion,” he said.

“Investors could position for a potential share price rebound for Gamuda in the second half of 2015,” Sharizan said, adding that Gamuda remains the research house’s top construction sector pick.

Last Friday, SRS Consortium, in which Gamuda holds a 60% stake, was appointed as the PDP for the TMP project.

The other two partners in the consortium are Penang-based Loh Phoy Yen Holdings Sdn Bhd and Ideal Property Development Sdn Bhd, which have a 20% stake each.

The PDP will be working closely with the Penang government in the next six months to ascertain the detailed execution master plan and engineering designs, gather public feedback, and obtain all state and federal approvals for each TMP component. The first project under the TMP is expected to be rolled out by 2017.

This article first appeared in the digitaledge Daily on Aug 17, 2015. Subscribe here.