Date of Report
October 14, 2024
Broker
UOB Kay Hian
Company Overview
Gamuda is a leading civil engineering construction company based in Malaysia, with diversified interests in property development and water concessions. The company’s operations have a broad geographical reach, with significant contributions from both domestic and overseas markets, particularly Australia. Gamuda is well-positioned to benefit from Malaysia’s growing infrastructure sector and is involved in multiple mega projects.
Stock Data
- Share Price: RM8.15
- Target Price: RM9.16
- Upside: +12.4%
- Bloomberg Ticker: GAM MK
- Market Cap: RM22,988.6m (US$5,360.3m)
- 52-week high/low: RM8.43 / RM4.23
- Major Shareholders:
- Amanah Saham Nasional Bhd: 13.4%
- Employees Provident Fund Board: 10.3%
- Generasi Setia M Sdn Bhd: 4.1%
Key Financial Metrics (FY2024)
- Revenue: RM13,347 million
- Net Profit: RM912 million
- EPS: 31.9 sen
- PE Ratio: 25.5x
- Dividend Yield: 1.5%
- Net Debt to Equity: 45.8%
- Return on Equity (ROE): 8.2%
Business Segments
1. Engineering & Construction
Gamuda’s engineering and construction segment is expected to benefit from both domestic and overseas infrastructure projects, with a total order book of RM24.8 billion as of FY24. Notable projects include:
-
Malaysia:
- Upper Padas Hydroelectric Dam in Tenom, Sabah (RM2-3 billion)
- Penang Mutiara LRT Segment 1 (RM4.8 billion, based on Gamuda’s 60% stake)
- Strong contender for the civil works of Pan Borneo Sabah Phase 1B (RM15.7 billion) and MRT 3 (RM34 billion).
-
Australia:
- Boulder Creek Wind Farm in Queensland (A$243 million).
- Gamuda is involved in 3-4 other renewable energy projects, with strong tender pipelines.
-
Revenue Composition:
Overseas projects made up 86% of the segment’s FY24 revenue. In FY25, the revenue mix is expected to shift, with local projects contributing 30%, up from 15%.
2. Property Development
Gamuda’s property division has been performing robustly, with FY24 sales amounting to RM5 billion (+22% year-on-year). The division is expected to achieve RM6 billion in sales in FY25, driven by:
- Vietnam:
- Eaton Park (GDV: RM5.1 billion, 100% sold)
- Additional launches such as The Meadows and Springville in Ho Chi Minh City.
- Malaysia:
- New developments include Gardens Park in Sungai Buloh, with strong bookings already in place.
- Other notable projects include London West Hampstead and Sime Darby Property’s Elmina Business Park.
3. Water Concessions
The water concession segment remains a stable contributor, though it is smaller compared to the other segments. It continues to provide consistent cash flows to the company, with a slight increase in margins expected in the coming years.
Growth Drivers
1. Mega Projects and Strong Order Book
Gamuda’s strong pipeline of projects, both domestic and overseas, positions it for solid growth in the coming years. The company expects to increase its order book from RM24.8 billion in FY24 to RM40-45 billion by the end of FY25. Major upcoming projects include:
-
Malaysia:
Several large-scale infrastructure projects, including the Upper Padas Hydroelectric Dam, Penang LRT Segment 2, and the Pan Borneo Highway, are expected to materialize between 4Q24 and 1H25.
-
Australia:
Gamuda and its subsidiary, DT Infrastructure, are actively bidding for contracts worth A$5-6 billion, including projects related to the Suburban Rail Loop (SRL) and renewables.
2. KLCI Index Inclusion Potential
At its current market cap of RM23 billion, Gamuda ranks as the 22nd largest stock on Bursa Malaysia, potentially positioning it for inclusion in the KLCI Index during the December 2024 review. This could lead to a re-rating of its stock, with increased foreign investor interest and ETF-linked fund flows.
3. Renewable Energy Projects
Australia’s pivot towards renewable energy provides significant opportunities for Gamuda, particularly with the group’s involvement in wind farms and other renewable projects.
4. Data Center (DC) Projects
Malaysia is emerging as a data center hub in the ASEAN region. Gamuda has secured RM2.2 billion worth of DC-related contracts, including projects with Sime Darby Property. The company is exploring an additional RM4-6 billion in DC contracts, expected to contribute to earnings in FY25-26.
Valuation & Recommendation
UOB Kay Hian maintains a BUY rating on Gamuda, with a target price of RM9.16 based on a sum-of-the-parts (SOTP) valuation. This target price implies a 23x FY25F PE. The valuation takes into account the strong prospects in Gamuda’s construction, property, and renewable energy segments, as well as potential catalysts such as inclusion in the KLCI index.
Sum-of-the-Parts Valuation
- Construction: RM18.5 billion (22x FY25 PE)
- Property: RM11.3 billion (10% discount to RNAV)
- Water Concession: RM322 million
- Less Net Debt: RM4.1 billion
Risks
- Delays or cancellations of major projects.
- Rising costs or inflation affecting margins.
- Foreign currency fluctuations, particularly with respect to Gamuda’s overseas operations in Australia and Vietnam.
