KUALA LUMPUR: Shares in Gamuda Bhd
rose in early trade Thursday after securing a RM3.45bil for the construction of Taiwan’s Kaohsiung Mass Rapid Transit (MRT) metropolitan line from the Kaohsiung City government.
Gamuda rose 1.3%, or six sen to RM4.66 at 9.56 am. The counter has gained over 23% so far this year.
Gamuda said the company was awarded the contract along with Taiwan-based company, Asia World Engineering and Construction Co (Awec), in an unincorporated joint-venture arrangement.
Gamuda was appointed as the main contractor and holds a majority share of 88% while Awec has 12% hence its share of the contract value is RM3.03bil.
TA Securities said the latest contract would improve Gamuda’s outstanding order book to another new record high of about RM23.6bil, equivalent to 4.3x FY23 construction revenue.
“Assuming a pretax profit margin of 9%, we expect this project to contribute a net profit of RM205.2mil throughout the construction period,” it said.
The research house has maintained its FY24 to FY26 earnings forecasts as the job win is within its FY24 order book replenishment assumption of RM12.0bil.
It has maintained a “buy” call on Gamuda with an unchanged target price of RM5.19 based on the sums-of-parts (SOP) valuation.
Meanwhile MIDF Research said with this latest win, Gamuda’s unbilled construction order book stands at RM22bil to RM24bil, with strong earnings visibility up to FY27.
“As guided in the earnings call last month, management is optimistic on both domestic and international domestic wins, targetting to secure RM25bil of new jobs in FY24 and FY25.
“There are five more projects on its radar over the next 15 months, including one in Taiwan and the MRT3 underground package,” it said.
MIDF has maintained its estimates as the new project win was in line with expectations. It has also maintained the target price at RM5.38.
“Gamuda is our top pick for the construction sector, backed by its bulging order book that is expected to deliver strong earnings over the next few years, attributable to its strong expansion overseas, especially in Australia,” it said.
The research house said the prospects for the construction sector in Malaysia are also looking bright, with the Government’s commitment in pushing through with vital projects to improve connectivity and in providing better amenities and infrastructures.
Apart from MRT3, Gamuda will also be involved in the Penang LRT development and it is also among the bidders for the Pan Borneo Sabah packages.
In Australia, the newly acquired DT Infrastructure places Gamuda in a sweet spot to undertake more and larger infrastructure projects, especially rail.
“All factors considered, we are maintaining our ‘buy’ recommendation on Gamuda,” MIDF said.
