Analysts upbeat on Gamuda’s overseas venture, substantial order book

• MIDF Research: “Its bulging order book of RM24.2 billion provides strong earnings visibility over the next few financial years and it is expected to grow larger with the potential wins as stated above.”

KUALA LUMPUR (June 26): Analysts remain upbeat on Gamuda Bhd (KL:GAMUDA), which recently reported stronger quarterly earnings, given its extensive overseas exposure and substantial order book.

MIDF Research kept its buy recommendation on Gamuda, its top pick in the construction sector, citing the group as a “premium builder” after its venture into data center construction.

“Its bulging order book of RM24.2 billion provides strong earnings visibility over the next few financial years and it is expected to grow larger with the potential wins as stated above.

“The improving prospects of its property development business, especially from its exposure in Vietnam, where demand currently outstrips supply, places it in a favourable position,” it said in a note on Wednesday.

Separately, RHB Investment Bank, citing Gamuda’s management, said the group is confident of surpassing the RM30.0 billion mark for its order book by December 2024.

“Its outstanding order book now stands at RM24.2 billion and assuming a burn rate of RM5.0 billion every six months, we believe Gamuda can secure at least RM10.0 billion of new projects in 2HCY2024,” it said.

RHB maintained its “buy” call on Gamuda, placing a target price at RM7.69, representing an 18% upside and a 3% FY2024  yield.

Meanwhile, the house noted that Gamuda’s 9MFY2024 core earnings of MYR639 million marked a 5% year-on-year (Y-o-y) growth, aligned with expectations at 70% and 65% of RHB’s and street estimates, respectively.

RHB anticipates stronger performance in 4QFY2024, spurred by the property sector, especially overseas projects, and ongoing construction operations.

“We envisage property earnings to be stronger in 4QFY2024 due to lumpy recognitions, particularly from West Hampstead in London. Moreover, the property arm’s unbilled sales stands at RM6.7 billion as at end 9MFY2024, versus RMR5.7 billion during the end-9MFY2023 period,” it added.

Meanwhile, Public Investment Bank (Public Invest) cut its rating on the counter to “trading buy” with a raised target price of RM6.80, due to a limited upside of +4.6%.

The house observed a stronger quarter for Gamuda, highlighted by a 3QFY2023 net profit of RM235.7 million, reflecting a 5.5% y-o-y and 12.9% quarter-on-quarter increase.

However, the cumulative net profit of RM639.6 million for 9MFY2024 fell short of their full-year expectations.

Despite this, Public Invest expects a catch-up in performance in the succeeding quarter, driven by higher contributions from both Gamuda’s domestic and overseas engineering and construction (E&C) divisions.

It said Gamuda’s near-term performance will be driven by overseas construction activities, as projects in Australia and Taiwan continue to pick up pace.

“The group expects new project wins to pick up in the coming quarters, to meet its RM25 billion project replenishment target for FY2024/FY2025.

“For its properties division, the group launched two new projects, namely Gardens Park (RM4 billion gross domestic product/GDV) and Eaton Park @ Ho Chi Minh City (RM5.1 billion GDV), to drive future sales.

“Besides that, the group also intends to add another two QTPs (quick turnaround projects) in 2024, on top of the eight QTPs in its portfolio currently,” Public Invest added.

Looking to buy a home? Sign up for EdgeProp START and get exclusive rewards and vouchers for ANY home purchase in Malaysia (primary or subsale)!