Gamuda Secures Major MYR0.7b Wind Farm Project, Strengthening RE and E&C Leadership

Date of Report
September 29, 2024

Broker
Maybank Investment Bank Berhad

Overview of Gamuda

Gamuda Berhad (GAM MK) is a leading engineering and construction (E&C) player, known for its expertise in highly technical tunneling works and its substantial property development and water operations management. The company has successfully undertaken significant infrastructure projects, including rail, water, and road systems, both domestically and internationally. Its strategic focus on renewable energy (RE) and sustainable construction practices positions it as a prominent player in the industry.

Recent E&C Contract Win: Boulder Creek Wind Farm Project

Gamuda’s 100%-owned Australian subsidiary, DT Infrastructure (DTI), secured a MYR0.7 billion (AUD243 million) design-and-construct contract for the Boulder Creek wind farm project in Queensland, Australia. This project includes civil and electrical works, comprising 38 wind turbines with a generating capacity of 228MW, expected to power 114,000 homes. The project is scheduled for completion by Q3CY2027.

Key Project Details:

Project Owners: Aula Energy Holdings Pty Ltd and CS Energy Ltd (owned by the Government of Queensland).
Scope: 38 turbines, 228MW capacity, construction of 41km of access tracks, and ~700,000m³ of bulk earthworks.
Contribution: Gamuda anticipates a net profit of MYR21 million from the project between FY27 and FY28.

Financial Highlights

Gamuda’s financial standing is robust, bolstered by an outstanding E&C order book of MYR25.5 billion, with MYR11.5 billion in Australian projects. The company’s balance sheet reflects a net gearing ratio of 0.39x, providing substantial debt headroom for further growth in E&C and property operations.

FY23-FY27 Forecasts:

Revenue for FY24 is projected at MYR13.3 billion, with expected growth to MYR18.3 billion by FY27.
Core net profit for FY24 is MYR912 million, with a forecasted increase to MYR1.39 billion by FY27.
Core earnings per share (EPS) growth from 33.3 sen in FY24 to 49.9 sen in FY27.

Earnings and Price Target

The report maintains a “BUY” recommendation for Gamuda, with a 12-month price target of MYR8.70, representing a 10% upside from the current share price of MYR8.10 (as of September 29, 2024). The price target is based on a Revalued Net Asset Value (RNAV) valuation model, which incorporates Gamuda’s substantial order book and future earnings potential.

Engineering and Construction (E&C) Capabilities

Gamuda has developed a solid reputation for its technical expertise in tunneling works, which has allowed it to secure prestigious infrastructure projects. Its major projects include:

KVMRT 1 & 2
Ipoh-Padang Besar Electrified Double Track (EDT)
SMART Tunnel
Various water supply and highway infrastructure projects

Key Ongoing Projects:

Sydney Metro West – Western Tunnel: MYR2.8 billion, 65% completed, targeting completion in 2026.
Coffs Harbour Bypass: MYR1.5 billion, 32% completed, targeting completion by late 2027.
Boulder Creek Wind Farm: MYR702 million, recently secured, completion expected by 3QCY2027.

Property Development

Gamuda’s property arm is also a key revenue generator, with a strong focus on strategic land banks in Malaysia, Vietnam, Australia, and the UK. The company has a total gross development value (GDV) of MYR60 billion across these regions.

Property Segment Highlights:

Targeted MYR6 billion in property pre-sales for FY25, a 20% year-on-year growth.
Key projects include:
- Gamuda Cove (Klang Valley) with a GDV of MYR19.01 billion
- Gamuda Gardens (Klang Valley) with a GDV of MYR8.32 billion
- Gamuda City (Hanoi) with a GDV of MYR11.16 billion
Property pre-sales in the UK and Australia are also contributing significantly to growth.

Sustainability and ESG Initiatives

Gamuda is committed to sustainable development, spearheading its operations through the Gamuda Green Plan 2025 (GGP). The GGP is anchored on four pillars: sustainable planning and design, community engagement, environmental conservation, and digitalization for enhanced sustainability. The company has set ambitious targets, including:

Reducing Scope 1 & 2 emissions intensity by 30% by 2025 and 45% by 2030.
Planting 1 million trees by 2023, with over 600,000 trees already planted by end-FY23.
Targeting to develop 800MW of renewable energy assets.

Financial Metrics and Dividend Policy

Gamuda offers a balanced mix of earnings growth and dividends. The company’s core net profit margins are expected to rise from 6.8% in FY24 to 7.6% by FY27. The dividend policy remains strong, with a forecasted dividend yield of 2.5% for FY25-FY27.

Dividend Payout:

FY24: 16 sen per share
FY25-FY27: 20 sen per share

Foreign Shareholding and Valuation Trends

Foreign shareholding in Gamuda stood at 26.7% as of August 2024, reflecting continued investor confidence. The company has seen consistent price-to-earnings (P/E) and price-to-book (P/B) multiples, with a 12-month forward P/E of 20.2x and a P/B of 1.9x as of FY24.

Historical Price Drivers:

Key share price drivers include Gamuda’s exclusion from the MSCI Global Standard Index in 2021, the sale of its highway concessions in 2022, and its inclusion in the MSCI Emerging Market Index in February 2023.

Risks and Swing Factors

While Gamuda’s prospects remain strong, the report highlights potential downside risks, including:

Delays in key infrastructure project implementations.
Potential cost overruns in existing E&C projects.
Unforeseen regulatory changes that could affect project timelines, particularly in the renewable energy sector.