KUALA LUMPUR: Gamuda Bhd could see its orderbook surging nearly three-fold from RM10.9 billion currently if it secures two major projects, Affin Hwang Capital said.
They are the Mass Rapid Transit Line 3 (MRT3 and Penang Transport Master Plan (PTMP) projects.
Affin Hwang said Gamuda has competitive cost advantages to undertake MRT3 particularly. This is backed by the company’s 12 tunnel-boring machines (TBM) for MRT2 works that can be re-deployed for MRT3.
Gamuda was proposing to reduce the cost of the MRT3 by at least half to up to RM23 billion from the previous estimate cost of RM45 billion, Affin Hwang said in a report today.
The government reportedly may revive the MRT3 project by end of 2019, while began calling for tenders to appoint a turnkey contractor in 2020.
Affin Hwang said the MRT3 cost-saving can be done by reducing the scope of works. This includes underground works that could be reduced by one-third from the previous proposal.
“With tunnelling works for the MRT2 to complete in the first-half of 2020, it will be ideal to start work on MRT3 by end of 2020 to reduce mobilisation costs.
“We expect the potential margin to be high single digits of eight per cent, given that the contract award will likely be through an open or selective tender process,” the firm added.
Affin Hwang said Gamuda was likely to seek partners to undertake the MRT3 project to reduce operational risks.
For example, the MMC-Gamuda joint venture could be the entity used to tender for the project, given its strong track record as the contractor for MRT1, MRT2, Ipoh-Padang Besar double tracking and Stormwater Management And Road Tunnel (SMART) projects.
“We assume the MRT3 will be revived in the financial year ending December 2021, and Gamuda will win the contract with 50 per cent share of works, lifting its order book by RM10 billion in our earnings forecasts.”
It added that the RM32 billion Penang Transport Master Plan (PTMP) project could be revived, pending approval by the government.
“Hence, we raise Gamuda’s real net asset value (RNAV) per share estimate by seven per cent to RM4.12 on a higher construction division valuation.”
The firm upgraded its call on Gamuda to “buy” from “hold” with a higher target price of RM3.70, based on a 10 per cent discount to RNAV, following the MRT3 and PTMP project revivals.
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