PETALING JAYA: Gamuda Bhd
has the edge over the likes of YTL Corp Bhd and IJM Corp Bhd in building data centres, which will be the next growth area for the conglomerate, analysts say.
CGS-CIMB Research said Gamuda’s industrialised building system (IBS) plant will give the conglomerate an advantage and result in higher project pre-tax margins of over 20%.
Such margins are double of what tunnelling jobs for mass rapid transit (MRT) projects can offer. In addition, the IBS plant allows completion of data centres in just eight months.
The plant’s current utilisation rate of 50% gives it ample free capacity.
“To put things into perspective, assuming Gamuda clinches one RM500mil data-centre project a year, it will be able to replicate the income of a RM6bil MRT project over a six-year period,” CGS-CIMB Research said in a note.
IBS is a construction technique where components such as walls and ceilings are manufactured in a controlled environment such as a factory.
The research house noted that Gamuda is “exuding a new confidence” and that it is poised to see another record year in the ongoing financial year ending July 31, 2024 (FY24).
This was the key takeaway from Gamuda’s session at CGS-CIMB Research’s 16th Annual Malaysia Corporate Day.
The conglomerate projected that its revenue would double in FY24 to about RM16bil.
“We raise our FY24, FY25 and FY26 earnings per share (EPS) by 7%, 7% and 6%, respectively, and our target price to RM6.50 to factor in stronger revenues for property. At our new target price of RM6.50, Gamuda trades at 16 times 2024 EPS, which is still below its 18-year mean level of 17 times.
“Maintain ‘add’ for its strong earnings visibility from its record-high orderbook of RM26bil,” CGS-CIMB Research said.
Gamuda also reiterated its new order-win target of RM25bil a year in FY24 and FY25.
It said the medium-term wins will come from three projects in Australia worth A$7bil to A$8bil, and one project a year in Taiwan, Sabah and Penang.
CGS-CIMB Research said the execution of the Penang Light Rail Transit (LRT) project will move faster than the MRT Circle Line or MRT3 in the Klang Valley.
“Gamuda believes the RM10bil Penang LRT will take off by the first half of 2024 (1H24) and that it will have a significant role to play.
“For MRT3, it believes a rollout could happen in 2H24 after the government achieves some certainty in terms of subsidy savings,” he said.
Meanwhile, CGS-CIMB Research added that Gamuda expects its private finance initiative (PFI) to develop the 187.5MW Upper Padas Hydroelectric Power Plant in Sabah to be the first of more projects to come that will build its recurring-income stream.
Gamuda has 45% equity interest in the project.
“It has committed to the latter (PFIs) to replace the income loss from the sale of its toll road business in 2022.
“The power plant targets to achieve financial close by mid-2024 and to have finalised its power purchase agreement and tariff structure by then,” the research house said.
On dividends, CGS-CIMB Research pointed out that Gamuda said there will likely be no increase beyond the 12 sen it pays yearly.
“It may look to raise this only after earnings have achieved a more sustainable level when it reaches its peak orderbook in the next two years,” the research house said.
