CGS-CIMB expects Gamuda's core net profit to rise 7% in FY23F

• CGS-CIMB said that once earnings delivery picks up for its maiden Australia project Sydney Metro West which is 20-25% complete, that should instill more investor confidence in Gamuda’s ability to execute projects in Australia.

KUALA LUMPUR (June 20):  CGS-CIMB Securities has maintained its “Add” rating on Gamuda Bhd at RM2.40 with an unchanged target price of RM5.58 and said investors are overlooking Gamuda’s foray into Australia, where it now has RM14.6 billion worth of orders after acquiring DT Infrastructure Pty Ltd (DTI).

In a note on Monday (June 19), the research house said this already accounted for 71% of its  orderbook of RM20.5 billion as at Jan 31.

It said the acquisition at 4x DTI’s FY22 EV/EBITDA brought A$2 billion (RM6 billion) in new orders and opened a market for small/mid-sized projects worth A$25 billion which it no longer has to share by tying up with Tier 1 contractors.

CGS-CIMB said that geographically, the DTI acquisition opens doors to West Australia and Queensland (75% of DTI’s exposure), a market which Gamuda Engineering Australia has yet to enter.

“Gamuda estimates Australia construction revenue of RM2 billion in FY23F (our forecast: RM1.8 billion), RM7 billion in FY24F (our forecast: RM5 billion) and RM8.5 billion in FY25F (our forecast: RM6.2 billion).

“We think investors underestimates the PTMP project despite the federal government backing for LRT and this will be clearer after the state elections and the political overhang dissipates.

“To a lesser extent, investors seem more convinced about MRT 3, in our view,” it said.

CGS-CIMB said that once earnings delivery picks up for its maiden Australia project Sydney Metro West which is 20-25% complete, that should instill more investor confidence in Gamuda’s ability to execute projects in Australia.

“With robust earnings from construction and property, we expect core net profit to rise 7% in FY23F,” it said.