PETALING JAYA: Construction outfit Gamuda Bhd
has built up enough cost buffer to weather the uncertainties stemming from volatile energy prices and is confident in achieving its RM50bil order book target by the end of this year.
CGS International (CGSI) Research which hosted a meeting between the company and institutional clients on Tuesday, said that out of the total RM44bil order book as of January, the local component of RM13.6bil – comprising infrastructure projects but excluding data centres – was billed on a lump-sum basis and is, therefore, more vulnerable to cost escalation.
Additionally, the overseas projects, comprising 61% of the total, were billed on a cost-plus basis.
“Gamuda said it has built in enough buffer to factor in the increases in raw material costs for these projects and, in our view, is unlikely to utilise it unless cost pressures escalate further.
“The most affected project is the Penang Silicon Island reclamation, where works could deliberately slow down if diesel prices remain high,” the research house said.
CGSI Research estimates that earnings-per-share assumptions for the company’s financial year ending July 31, 2027 (FY27) to FY28 could be shaved off by 1% to 1.2% for every one percentage point decline in margins for its local infrastructure projects.
CGSI Research has kept an “add” call to the stock due to the diversified order book and visible pipeline of contracts, but has lowered the target price for the shares to RM5.78 from RM6.10.
