Gamuda set to post strong earnings due to its diversification strategy

PETALING JAYA: Gamuda Bhd is set to record strong earnings visibility for the remainder of its current financial year ending July 31, 2023 (FY23), underpinned by its robust, outstanding order book.

Hong Leong Investment Bank (HLIB) Research, in a report, said Gamuda’s order book stands at RM14.5bil as of end-January 2023.

It said this would rise to RM20.5bil after injecting Australia-based DT Infrastructure Pty Ltd’s (DTI) estimated unbilled order book of RM6bil.

“The acquisition is expected to be completed in mid-calendar year 2023.

“After RM10bil of contract wins in Australia within the past year, management is expecting a temporary lull period in mega project awards there, before picking up again in the first quarter of FY24.”

TA Research, meanwhile, said Gamuda’s order book (post the injection of DTI) would provide earnings visibility up to FY27.

“Despite the exit from the toll business, the group manages to gradually fill the earnings gap by securing more overseas jobs, especially from Australia.

“We expect the group to deliver another decent quarter ahead, underpinned by its robust outstanding order book and strong properties’ unbilled sales.”

MIDF Research noted that Gamuda posted a revenue of RM1.21bil for its property segment in the first half of FY23, an increase of 29% year-on-year.

The research house added that pre-tax profit for the segment came in at RM153.6mil, a jump of 57.4% year-on-year with a stronger margin of 12.8% compared with 10.5% in the same period last year.

“The group’s Celadon City development in Vietnam continues to be the main earnings driver for the segment, given the nature of its matured development.

“Pre-sales for the period was weaker at RM1bil, as buyers were adopting a wait-and-see approach following the general election.”

MIDF Research said Gamuda’s management expects pre-sales to surge in the second half of FY23, on the back of its strong bookings-in-hand and indicative strong responses for its upcoming launches.

“We remain sanguine on Gamuda’s earnings outlook, predicating on its strong current outstanding order book and its well-executed diversification strategy overseas, especially in Australia.

“Recall that it is also in the process of finalising its acquisition of DTI’s transport projects business in Australia, which is expected to be completed by June 2023.”

The research house said this would open more opportunities for Gamuda to secure new jobs in Australia, based on DTI’s civil construction expertise, especially in rail.

“We also like that Gamuda remains the front-runner of the Mass Rapid Transit 3’s largest package and that it plans to take it a step further by bidding for the systems package.

“All factors considered, we are maintaining our ‘buy’ recommendation on Gamuda, which is our top pick for the construction sector.”

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