Bright prospects seen for Gamuda

PETALING JAYA: Analysts are generally bullish on the prospects of engineering and construction giant Gamuda Bhd, on the back of a record-high order book, its chances of securing further projects such as in the mass rapid transit three (MRT3) and its presence in overseas markets that could cushion its risk exposure to any single country.

Hong Leong Investment Bank (HLIB) Research said in a report that Gamuda’s core net profit of RM190.4mil, which excludes the RM1bil gain on the group’s disposal of its four highways, for the quarter ended Oct 31, was above its and consensus expectations.

The three months in review was the first quarter of Gamuda’s financial year 2023 (FY23).

HLIB Research analyst Edwin Foo said, “We anticipate a stronger FY23 second half as the ramp-up of new projects and recognition of unbilled sales could accelerate earnings into the back-end of FY23. Gamuda has recorded a 24.9% year-on-year (y-o-y) growth in its net profit compared to the corresponding quarter of 2021.”

He noted that Gamuda’s order book stood at RM14.8bil as at Oct 31, with 78% of that amount coming from overseas projects.

“Contract wins for the group in 2022 has so far totalled RM13.9bil, and Gamuda is now shortlisted for two packages of the Suburban Rail Loop East tunnels in Australia which spans 26kms in total,” said Foo, before mentioning that award decisions for these two packages of the project would be in the first half and second half of 2023, respectively.

Going forward, HLIB Research expects more project shortlistings amidst the infrastructure boom Down Under, while domestically, it reported Gamuda is awaiting key decisions on the MRT3 and Penang South Island projects.

Kenanga Research, meanwhile, said Gamuda is doubling down on its efforts within the renewable space by setting aside RM2bil to develop 800MW of generating capacity.

The research unit’s analyst Lum Joe Shen also attributed Gamuda’s y-o-y net profit rise to a 142% surge in property earnings, underpinned by stronger billings as construction activities resumed as well as a pick-up in sales upon the economy’s reopening.

“In terms of property sales, Gamuda achieved RM480mil in the quarter ended Oct 31.

“We believe its property sales will pick up throughout its fiscal year backed by new launches worth a total of RM3bil, particularly in Ho Chi Minh City, Vietnam,” it said in a note to clients.

MIDF Research is also optimistic on Gamuda’s partnership with MMC Corp Bhd to secure the CMC303 package of the MRT3, which is set to be the largest package of about RM16.3bil, with an estimated 10kms of underground works, on the back of Gamuda’s vast experience in MRT1 and MRT2, and its status as the tunnelling expert and the largest contractor in Malaysia.

Given Gamuda’s dividend of six sen per share for FY23, MIDF Research maintains its “buy” call on the stock with a target price of RM4.67.

Similarly, HLIB Research also reiterated its “buy” rating on Gamuda, albeit at the lower target price of RM4.15, while Kenanga Research has an “outperform” call with a higher target price of RM5.15.