Gamuda: In discussion with banks to fund potential projects commentary

According to sources, Gamuda  (GAM MK, Sell, TP: RM2.94)  has started discussion with a consortium of banks for a multi-billion ringgit facility to finance the slew of mega projects that it would be undertaking soon, which includes the Klang Valley MRT (KVMRT) and the RM7bn Electrified Double Track Railway Project (EDTP) from Gemas to Johor Baru. For the KVMRT project, Gamuda together with its project project delivery partner, MMC Corp Bhd, are mandated to lead the implementation and delivery of the MRT. Currently, Gamuda-MMC are still in the running for the RM4bn tunnelling portion of  the KVMRT project. Gamuda has confirmed that it has been invited by China Railway Construction Co as one of its local construction partners for the upgrading of the RM7bn Gemas-Johor Baru railway line to an electrified double-tracking track. (StarBiz)

Comment by ECMLibra : We believe the recent run-up in Gamuda’s share price has discounted the firm possibly undertaking the Gemas – Johor Baru EDTP with its Chinese counterpart. We estimate Gamuda’s portion of the EDTP works is c.RM2.5bn. Our back-of-envelope calculations show that even with the EDTP, this only increases our RNAV valuation of Gamuda from RM2.94 to RM3.10, which represents 13% downside from last traded price of RM3.55. Maintain Sell.