KUALA LUMPUR, March 30 (Bernama) -- Bursa Malaysia’s benchmark index closed lower today, in line with most regional markets, as investors adjusted their risk exposure amid spiralling oil prices driven by the ongoing West Asia conflict, now in its second month. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) retreated by 24.75 points or 1.44 per cent to 1,687.90 from Friday’s close of 1,712.65. The market bellwether opened 10.57 points weaker at 1,702.08 and fluctuated between 1,682.79 and 1,702.38. The broader market was bearish, with decliners thumping advancers 956 to 371. A total of 373 counters were unchanged, 1,042 untraded and 134 suspended. Turnover expanded to 3.98 billion units worth RM4.85 billion from last Friday’s 2.97 billion units worth RM3.25 billion.
Results in line
2QFY7/16 net profit of MYR160m (-12% YoY, -0.7% QoQ) brought 1HFY7/16 net profit to MYR321m (-13% YoY), accounting for 48%/51% of our/consensus full-year forecasts. KVMRT 2 major works are expected to be awarded soon and the underground works value could exceed earlier forecast. Further upside could come from other infrastructure projects win. Reiterate as TOP BUY at unchanged RNAV-TP of MYR5.65.
KVMRT 1 works at tail end
In 2QFY7/16, construction pretax profit (before FRS 11) was 8% QoQ lower (-37% YoY) as construction works recognition declined 32% QoQ (- 28% YoY) but partly offset by higher 2QFY7/16 construction pretax profit margin of 8.2% (+1.1ppt QoQ, -1.2ppt YoY). These higher margins were due to the higher portion of higher-margin underground works recognised.
Offset by stronger concession earnings
Property development pretax profit (before FRS 11) also fell 12% QoQ (- 9% YoY) due to slower property progress billings (-6% QoQ, -10% YoY) and property pretax profit margins were also 1.5ppt QoQ lower (+0.2ppt YoY) to 22.6%. The weaker construction and property earnings were partly offset by stronger water and tolled expressways pretax profit (before FRS 11) (+7% QoQ, +9% YoY) due to improved contribution from its India expressways after the additional maintenance cost incurred in 1QFY7/16.
Earnings unchanged, maintain BUY
The value of KVMRT 2 underground works could exceed expectation and it could be awarded within one month. MMC-Gamuda is in a strong position to win the works. Additional job wins from KVLRT 3, Pan Borneo Sarawak Highway and Gemas-JB double track rail would provide further upside. However, this could be partly offset by lower property sales in FY16. Gamuda is our TOP BUY pick at unchanged RNAV-based MYR5.65 TP.
Source: Maybank Research, 25 March 2016
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