Affin Research maintains Buy on Gamuda

KUALA LUMPUR: Affin Research has maintained its Buy call on Gamuda with a target price of RM5.43 and continues to believe that Gamuda would be agreeable to a disposal of its stake in Splash if the valuation is adjusted to fairer level of RM2bil to RM2.2bil.

In a note on Thursday it said the approval of Langat II is positive for the firm(s) awarded the contract.

“Focused on the construction of the SBK Line and securing the award of Line 2 of the KVMRT, Gamuda, we believe is not in contention for the Langat II contract.

“Our price target and Buy call for Gamuda are based on its good earnings prospects from all its core operating assets and not conditional upon the disposal of its stake in Splash Equity,” it said.

Quoting press reports, Affin said the the Federal Government and Selangor State Government have agreed to invoke Section 114 of the Water Services Industry Act 2006 to take over the management of four water concessionaires in Selangor after negotiations fell through.

The takeover will be subject to conditions set by the Ministry of Energy, Green Technology and Water, including the appointment of two administrators by the National Water Services Concession.

“It was further reported that the SSG has approved the construction of the Langat II water treatment plant,” it said.

If confirmed by the Federal Government, the development would be a step forward.

“It is, however, unclear at this stage whether the offers dated Nov 21, 2013 made by Kumpulan Darul Ehsan Bhd will be improved to the satisfaction of the concessionaires,” it said.