Report Date and Broker
Date: October 27, 2024
Broker: Maybank Investment Bank Berhad
Orderbook and Strategic Wins
Gamuda has recently formalized its involvement in the Upper Padas Hydroelectric Project (HEP), bolstering its engineering and construction (E&C) orderbook to MYR31 billion. The project, secured in joint venture with Conlay Construction, has added MYR3.048 billion to Gamuda’s portfolio, with Gamuda’s share amounting to MYR2.29 billion. This significant contract aligns with Gamuda’s forecast and supports the bank’s BUY recommendation, underpinned by a target price of MYR9.60.
Earnings Forecast and Profit Contributions
Maybank Investment Bank has retained its earnings forecast for Gamuda, with job win assumptions supporting a projected net profit of MYR174 million from the new HEP contract by fiscal year 2031. This forecast assumes a 10% pre-tax profit (PBT) margin, which translates to an estimated EPS contribution of 6 sen.
Gamuda’s Competitive Position in the Market
Currently ranked 18th in market capitalization on the Kuala Lumpur Stock Exchange, Gamuda is projected to become a constituent of the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) in November 2024. This reinforces Gamuda’s position as a top player within the Malaysian market, driven by its substantial E&C projects and expanding property investments.
Engineering and Construction Expertise
As a leading E&C company, Gamuda has developed expertise in specialized infrastructure, particularly in tunneling and large-scale developments. This skill set has enabled the firm to secure major projects such as KVMRT 1&2, the Ipoh-Padang Besar electrified double track (EDT), and the SMART Tunnel. The Upper Padas HEP project further strengthens its portfolio and its reputation for handling complex infrastructure projects.
Geographical Expansion and International Orderbook
Gamuda has also expanded beyond Malaysia, marking Australia as its second base for E&C projects. Recent projects include the Sydney Metro West’s Western Tunnel and the Coffs Harbour Bypass. These international contracts contribute significantly to its MYR31 billion outstanding orderbook, with 37% of the value from Australian contracts, 30% from Malaysia, 24% from Taiwan, and 9% from Singapore.
Financial Metrics and Forecast
The report highlights Gamuda’s revenue growth, which has surged by 60.7% year-on-year to MYR13.3 billion in FY24. EBITDA growth also showed resilience, reaching MYR942 million. Future projections estimate a steady revenue stream with MYR6.2 billion of work secured for FY25 year-to-date. Additionally, Gamuda’s gearing ratio remains under control, at 0.39x as of July 2024, below the company’s internal cap, which leaves room for potential debt expansion for future projects.
Environmental, Social, and Governance (ESG) Initiatives
Gamuda is committed to strong ESG principles as part of its Gamuda Green Plan 2025. The company has committed to reducing its Scope 1 and 2 emissions by 30% by 2025 and 45% by 2030, using 2022 as the base year. With a focus on sustainable construction, Gamuda has set targets for resource efficiency, such as a 20% reduction in construction waste by 2025. Additionally, its biodiversity initiatives include planting over 1 million trees by 2023 and developing green urban areas across its property sites.
Strategic Property Developments
In property development, Gamuda has a strategic landbank valued at MYR60 billion, with significant projects in Malaysia’s Klang Valley, as well as ventures in Vietnam, London, and Australia. Targeting MYR6 billion in property pre-sales for FY25, Gamuda has also ventured into the UK market as its fourth property base.
Risk Factors and Potential Headwinds
Potential downside risks include delays in implementing key infrastructure projects, cost overruns in E&C orderbook execution, and any lag in reclamation work on Penang Silicon Island. Additionally, the company’s progress is partially dependent on Malaysia’s macroeconomic environment, government infrastructure policies, and labor costs.
Conclusion
Gamuda’s strategic wins and a robust orderbook place it in a favorable position for long-term growth. With its expertise in E&C and a commitment to sustainable practices, the company is well-positioned to maintain its competitive edge and deliver value to shareholders, as reflected in Maybank’s sustained BUY recommendation.
