Overseas ops boosted FY22 performance
- FY22 results were above expectations on strong overseas earnings.
- Highway deal nears completion (by end-CY22F) with 38 sen special dividend at 10% yield. Order book growth prospects remain robust; MRT 3 is next.
- Add rating intact with a higher TP of RM4.75 (10% RNAV discount).
FY22 results above expectations; core net profit up 42% yoy
Gamuda reported a stellar performance for FY22, with all divisions (including highway assets) contributing to strong yoy earnings recovery. FY22 core net profit of RM832m (excluding RM26m loss provision from the imminent sale of SMART Highway, recognised in 4Q22) made up 109-110% of our and consensus full-year forecasts. Key deviation was stronger revenue and earnings for the property development division (FY22 revenue: +111% yoy, FY22 net profit: +97.3% yoy) due mainly to robust performance for its overseas property development ventures. This is reflected in FY22’s group revenue (including share of JV as per segmental breakdown, Figure 2), where overseas revenue surged 184% yoy
and made up 31% of total group revenue. 4QFY22 revenue accelerated 120% yoy, also driven by stronger billings for overseas construction projects. FY22 EBITDA margin of 17.5% was above our forecast of 15%. Overall, FY22 core net profit of RM832m (including RM129m contribution from the four domestic highways) surged 42% yoy.
Highway sale imminent; special dividends and growth strategies
With all conditions precedent (CPs) fulfilled, the RM5.5bn highway divestment deal with ALR is targeted to be completed by mid-Oct 2022. Gamuda expects to receive the RM2.3bn cash proceeds by end-CY22F. Special dividend plans announced earlier are intact, where 43% of total proceeds (RM1bn) will be earmarked for special dividends (38 sen/share, 10% dividend yield on top of normal dividends of 12 sen/share). From 12% net gearing at end-Jul, Gamuda will turn net cash with comfortable headroom to take on new ventures. Key strategies/targets following the highway sale highlighted during the postresults briefing include: 1) securing the estimated RM8bn-9bn MRT 3 package, 2) new quick turnaround projects – QTPs (RM2.9bn GDV target) – for property development division with higher IRRs, 3) execution of the Penang South Island (PSI) project, with approval targeted for Oct 22, and 4) RM12bn p.a. targeted new overseas contract wins (Australia, Taiwan, Singapore) from FY23F onwards. Current outstanding order book stands at a robust RM14bn.
Reiterate Add rating with a higher RM4.75 TP
We cut FY23-24F EPS by 14-18% to reflect the impact of the sale of highway assets and introduce FY25F. We raise FY23F DPS from 12 sen to 50 sen to include the 38 sen special dividends; FY23F dividend yield is attractive at 12.9%. Our TP rises to RM4.75 (+9%; still at 10% RNAV discount) as we roll over our valuation to end-CY23F and update balance sheet items. Maintain Add. Upside risks: domestic and overseas job wins. Downside risks: project delays.