Date: September 27, 2024
Broker Name: Maybank Investment Bank Berhad
Earnings and Financial Performance
Gamuda reported its FY24 core net profit (CNP) at MYR912 million, which was in-line with expectations, representing 100% of the Maybank estimate and 95% of consensus. This marks the third consecutive year of record profits for Gamuda. The company achieved a 6% year-on-year (YoY) growth in 12-month core net profit (CNP), despite the disposal of its tolled highway operations in FY23. The FY24 revenue increased by 62.4% to MYR13.35 billion, primarily driven by its engineering and construction (E&C) division, as well as its property development arm.
Gamuda’s FY24 normal dividend per share (DPS) of 16 sen, declared in earlier quarters, represents a 33% YoY increase, up from 12 sen in FY23. Furthermore, a 1-for-1 bonus issue has been proposed to enhance liquidity.
Q4 Financial Highlights
- 4QFY24 CNP Growth: +16% quarter-on-quarter (QoQ) and +6% YoY.
- Earnings Drivers: Higher billings in the E&C and property sectors contributed to the rise in profits. Notably, E&C margins improved slightly in Q4, although property margins remained flat.
- Overseas Contribution: 84% of E&C’s FY24 revenue came from international projects, a significant increase from 57% in FY23.
- Net DPS Forecast: The DPS forecast for FY25 and FY26 was raised to 20 sen per annum, up 4 sen based on guidance.
Margins and Profitability
Gamuda experienced a slight decline in margins for its E&C and property operations in FY24. The E&C PBT margin was reduced to 5.9%, reflecting a mix shift toward lower-margin overseas projects. However, this trend is expected to reverse as higher-margin domestic projects progress. Property PBT margin fell to 11.3% due to the completion of the highly profitable Celadon City project and increased marketing expenses for new launches.
Job Wins and Orderbook
Gamuda’s outstanding E&C orderbook reached MYR24.8 billion as of July 2024, bolstered by significant wins totaling MYR10 billion in FY24. Key project wins include:
- Kaohsiung MRT CY01: MYR3 billion
- Singapore Cross Island Line Phase 2: MYR1.8 billion
- Google’s Hyperscale Data Centre in Elmina Business Park: MYR1.7 billion
- AIMS’ Cyberjaya Block 3 Data Centre: MYR300 million
- Metronet Hi-Capacity Signaling in Perth: MYR2.3 billion
The company aims to secure MYR30 billion worth of job wins in FY25-26, driven by the Upper Padas Hydroelectric Power (HEP) project, Mutiara LRT Segment 1, and renewable energy (RE) projects in Australia. Approximately 44% of Gamuda’s outstanding orderbook comes from Australia, 28% from Malaysia, 17% from Taiwan, and 11% from Singapore.
Property Development
Gamuda’s property pre-sales for FY24 reached MYR5 billion, a 22% YoY increase. The domestic-to-overseas sales mix was approximately 50:50, with strong performance from key domestic projects such as:
- Gamuda Cove
- Gamuda Gardens
- Horizon Hills
Overseas, top-performing projects included Gamuda City in Hanoi, and Elysian QTP and Eaton Park QTP in Vietnam. Unbilled sales totaled MYR7.7 billion as of July 2024, with FY25 pre-sales targeted at MYR6 billion, representing a 20% YoY increase.
New developments in Vietnam, such as Springville and The Meadows, are expected to drive future sales. These projects have gross development values (GDV) of MYR1.8 billion and MYR0.3 billion, respectively.
Bonus Issue and Valuation
To reward shareholders and increase trading liquidity, Gamuda has proposed a 1-for-1 bonus issue, which will involve the issuance of up to 2.98 billion new shares. The completion of this issue is expected by Q4 2024.
Maybank has raised its revised net asset value (RNAV)-based target price for Gamuda to MYR8.70, incorporating the company’s strong orderbook replenishment prospects and higher projected FY25 earnings. Gamuda currently trades at 19.9x FY25E price-to-earnings ratio (PER), and the new target price implies a PER of 21.7x, reflecting the potential for further growth.
Risks and Challenges
While Gamuda is well-positioned for growth, there are several risks that could impact its performance, including:
- Project Delays: Potential delays in major infrastructure projects, such as the Silicon Island reclamation work, could affect earnings.
- Cost Overruns: Execution risks, particularly in large overseas projects, could lead to cost overruns.
- Foreign Exchange Impact: The strengthening of the Malaysian Ringgit (MYR), particularly in relation to property projects in Vietnam, may put pressure on margins.
Conclusion
Gamuda’s strong financial performance in FY24, bolstered by significant international project wins and robust property sales, positions it for continued growth in FY25 and beyond. The company’s strategic focus on expanding its orderbook, both domestically and internationally, coupled with a proposed 1-for-1 bonus issue, provides a solid foundation for future shareholder value creation.
