CGSI Research said it believes Gamuda can hit the higher end of its RM40bil to RM45bil order book target by end-2025 .
PETALING JAYA: A modest second quarter for its financial year ending July 2025 (2Q25) is expected when Gamuda Bhd
releases its financial results later this month, as margin recovery will become more apparent in its 2026 financial year (FY26), says CGS International (CGSI) Research.
The research house said while 41% of the constructor’s RM37bil order book as of February consists of higher-margin local projects, many of these, such as data centres, the Upper Padas hydro dam in Sabah, and the Penang Light Rail Transit (LRT) project, are still at their early stages in terms of revenue recognition.
Additionally, the construction progress of Gamuda’s higher-margin Eaton Park luxury residential development in Vietnam has not reached the threshold for meaningful recognition.
The project reported RM970mil in pre-sales for FY24, equivalent to 20% of total FY24 presales.
The research house also sees work progress for local projects picking up in the second half of FY25, lending weight to better margin recovery in FY26.
CGSI Research added that the group’s 1Q25 construction margins were modest at 5.4%, but local construction margins exceeded 10%.
Gamuda has modelled an 8% margin for FY26 from 6% in FY24.
The research house said, in its view, Gamuda will also be looking to build on its property success in Vietnam, with 19% of total gross development value of RM61bil as of last October, given strong underlying demand with property margins of about 15%.
The research house cut its FY25 to FY27 earnings per share forecasts for Gamuda to factor in revised recognition from the group’s local projects.
It lowered its target price to RM6 a share assuming a lower price-earnings ratio of 20 times for Gamuda’s construction segment to err on the conservative side on the group’s longer-term data centre pipeline.
CGSI Research reiterated its “add” call on the counter, favouring Gamuda for its diversified order book and growing property business.
The key downside risks for the group include delays in contract awards and higher raw-material costs, while key re-rating catalysts are more construction wins and stronger property sales.
CGSI Research said it believes Gamuda can hit the higher end of its RM40bil to RM45bil order book target by end-2025 given year-to-date new wins of RM13.4bil.
This would imply that it needs an additional RM20bil in new wins by the end of this year assuming a burn rate of RM1bil per month.
The potential wins in the near term include a water treatment plant in Sabah, valued at about RM4bil to RM5bil, and more data centre jobs.
“Besides this, we see a visible pipeline of about RM30bil for the next 18 months from work on the Suburban Rail Loop system in Australia worth a total of RM10bil, and Early contractor Involvement for two pump-hydro projects in Australia worth about RM9bil and the MRT Taiwan project worth RM10bil,” said CGSI Research.
Gamuda closed five sen lower at RM4.06 in yesterday’s trading.
