PETALING JAYA: Analysts are positive about Gamuda Bhd
’s prospects following the group’s Sabah hydroelectric power plant contract win.
Gamuda, together with its joint-venture (JV) partner Conlay Construction Sdn Bhd, had formalised the construction contract for the 187.5MW Upper Padas build operate and transfer hydroelectric power plant in Sabah from Upper Padas Power Sdn Bhd last Friday.
Gamuda has a 75% stake in the JV and Conlay Construction 25%.
Of the RM3.048bil Sabah hydro contract, Gamuda’s projected revenue is pegged at RM2.3bil based on its 75% stake in the JV, according to analysts.
CGS International (CGSI) Research, in a report, said: “We think Gamuda is on track to exceed the higher end of its forecast RM30bil to RM35bil order book guidance by end of 2024.”
The group’s year-to-date wins are about RM15.5bil, bringing its order book to RM31bil as at October, the the research housenoted.
CGSI Research said “Gamuda needs to clinch an additional RM9bil in new wins to achieve an order book of RM35bil by end-2024, assuming a burn rate of RM1bil per month.
“We expect incremental new wins for the rest of 2024 to be from local projects, such as Penang Light Rail Transit (LRT), Sabah water treatment plant and data centres.”
According to the research house, there is a potential for some project wins in Australia before the year-end from Gamuda’s 100%-owned subsidiary, DT Infrastructure.
Local projects contributed 30% of the group’s total order book of RM31bil as at October versus 22% in January while foreign projects from Australia, Taiwan and Singapore made up the remaining 70%.
“We expect the share of local projects to rise to 44% of its order book by December this year, with potential wins from Penang LRT and Sabah hydro,” added CGSI Research.
It had reiterated its “add” call on the stock with a target price (TP) of RM10 a share.
This was premised on Gamuda’s diversified order book, increasing data centre exposure and growing property business.
It noted the key rerating catalysts include more construction wins and stronger property sales.
Meanwhile, Kenanga Research, in a note to clients, said the confirmation of the latest contract would see Gamuda with a projected revenue of RM2.29bil based on its 75% stake, and a pre-tax profit margin of 10% for this project.
“We are positive on this project, which is widely anticipated as it was previously awarded the concession, but pending finalisation of the engineering, procurement, construction, and commissioning, contract.
“Its order book is nearing its end-2024 target of RM35bil. We maintain an ‘outperform’ rating at a TP of RM9.20,” it added.
The research house has also maintained the group’s new job win assumption at RM14.5bil and RM15bil for FY25 and FY26 respectively.
“We like Gamuda for being in the driver’s seat of the Mutiara Line of the Penang LRT, its ability to secure new jobs in overseas markets and its strong war chest after the disposal of its toll highways,” the research house noted.
Furthermore, the group’s strong earnings visibility is underpinned by a record outstanding order book (excluding Penang LRT) and its inroads into the renewable energy space.
RHB Research, in its report, pointed out that the latest contract was Gamuda’s third win for FY25.
As for year-to-date FY25 new jobs wins, Gamuda has clinched around RM6.2bil worth of new contracts (including the Upper Padas Hydro project) versus Kenanga Research’s FY25 job replenishment target of RM20bil.
The research house said: “There are more projects related to Upper Padas Hydro, which may arise in the coming quarters or next financial year, in our view, namely the water supply scheme and also the floating solar solution.”
“Assuming a burn rate of RM11bil from November to end-December 2025, the group needs to win RM20bil of new contracts from November until December 2025 to meet the lower end of the order book target range of RM40bil by end-2025,” it noted.
RHB Research has a “buy” call on the stock with a TP of RM10.52 a share.
