CGS-CIMB Research said the acquisition of DTI has opened the doors to West Australia and Queensland, a market which Gamuda Engineering Australia has yet to enter.
PETALING JAYA: The fulfilment of Australian jobs and the venture into quick turnaround projects or QTP are key to Gamuda Bhd
’s earnings growth in the quarters ahead.
CGS-CIMB Research said the engineering and construction company’s order book stood at a record RM20.5bil as at Jan 31, 2023.
It said 78% of the group’s total outstanding order book was made up of foreign orders.
It added that its earnings visibility had moved from two to three years in the past, to three to four years currently until the financial year 2026 (FY26)/FY27.
“Gamuda plans to double its order book from RM21bil as at Jan 31, 2023 and presales from RM4bil for FY22 in the next two to three years.
“Its local townships achieved strong presales, with local-to-overseas pre-sales ratio reaching 60:40,” the research house said in a report yesterday.
CGS-CIMB Research said the aforementioned target seems reasonable should Gamuda be able to clinch three projects, namely, the Penang South Islands reclamation works worth RM4bil to RM4.5bil; the mass rapid transit three (MRT3) where the MMC-Gamuda consortium was the lowest bidder for the tunnelling portion at RM13.3bil; and the Suburban Rail Loop East in Victoria which consists of two packages with a combined value of A$6bil (RM18.9bil).
“We think investors underestimate the Penang transport master plan project despite the federal government backing for the light rail transit and this will be clearer after the state elections and the political overhang dissipates.
“To a lesser extent, investors seem more convinced about the MRT3, in our view.
“We also believe investors are overlooking Gamuda’s foray into Australia, where it now has RM14.6bil worth of orders after acquiring DT Infrastructure Pty Ltd (DTI).
“This already accounted for 71% of its order book of RM20.5bil as at Jan 31, 2023,” said the research house.
CGS-CIMB Research said the acquisition of DTI has opened the doors to West Australia and Queensland (75% of DTI’s exposure), a market which Gamuda Engineering Australia (GEA) has yet to enter.
“Some investors may be of the view that Gamuda’s valuations should compress given the lack of recurring income and higher risk profile with its overseas ventures.
“However, we think it should command a premium versus its peers, given its successful foray into the Australian infrastructure sector and being less reliant on local public sector infrastructure jobs, which have been slow.”
Gamuda expects GEA and DTI’s order book, comprising both large and small and mid-sized projects to reach A$12bil (RM37.8bil) per annum in FY23 to FY25.
“We believe that once earnings momentum picks up for its maiden Australia project, Sydney Metro West (which is 20%-25% complete), that should instil more investor confidence in Gamuda’s ability to execute projects in Australia,” said the research house.
For its second quarter ended Jan 31, 2023, Gamuda’s net profit rose to RM194.62mil from RM177.13mil in the previous corresponding period. Revenue grew to RM1.4bil from RM1.2bil a year earlier. Basic earnings per share stood at 7.46 sen versus 7.05 sen previously.
