Kesas deal could increase Gamuda’s earnings

Kesas deal could increase Gamuda’s earnings
Posted on 1 January 2014 - 05:39am
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PETALING JAYA (Jan 1, 2014): Public Investment Bank estimates that Gamuda Bhd's increased stake in Kesas Holdings Bhd will help boost Gamuda's FY14-16 forecast earnings by 5% to 6% in view of the proposed deal to dispose its water assets.

The research house however said in a note yesterday that it would be keeping its earnings estimates unchanged pending the signing of the deal.

Public Investment Bank estimates that Kesas is currently contributing between RM30-RM40 million net income to the group.

Gamuda's purchase of the 40% stake from Permodalan Nasional Bhd and AmCorp Properties is expected to increase its net gearing from current 20% to 31%, which is manageable in Public Investment Bank's view.

"We understand that the sustainable toll receipts estimated for Kesas is RM120 million per annum or c.11.7x PER of the latest offer, which appears to be fair in our view, considering it is a mature concession with contractual toll rate hikes. The toll concession is expiring in 2023," it said.

In view of the anticipated infrastructure spending, job flows for Gamuda remains good but the research firm opine that the risk-reward is not compelling for now.