No quake impact on Gamuda’s work in Taiwan

Builder’s projects located 200km away from epicentre

“Gamuda’s projects in Taiwan accounted for Rm4.5bil spread across six contracts, constituting 19% of the company’s Rm24bil outstanding order book.”

RHB Research

PETALING JAYA: The recent earthquake that rattled Taiwan’s Hualien County left no significant impact on the operations of Malaysian infrastructure giant Gamuda Bhd in Taiwan, says RHB Research.

Taiwan’s Hualien County in Eastern Taiwan was struck by an earthquake with a magnitude ranging between 7.2 and 7.5 on April 3, the strongest earthquake to hit Taiwan in 25 years.

Citing the US Geological Survey, RHB Research stated that the earthquake’s epicentre was located about 18km south of Hualien.

RHB Research said that, given the sites of Gamuda’s construction projects are far away from Hualien County – at least 200km from the epicentre – there was no impact on Gamuda’s work sites in Taiwan.

“As such, there was no major impact coming from the earthquake as Gamuda’s sites only experienced magnitudes between four and 4.5 which are considered to be a light earthquakes that can be felt but generally causes no damage,” the research house noted.

RHB Research made no changes to its earnings estimates for the builder, as it sees no major adverse impact towards Gamuda’s operations at its work sites in Taiwan.

As of the end of January, RHB Research said Gamuda’s projects in Taiwan accounted for Rm4.5bil spread across six contracts, constituting 19% of the company’s Rm24bil outstanding order book.

“Out of the six ongoing projects in Taiwan, the rail-related ventures have shown a completion rate of 1% or less,” the research house noted, suggesting that major tasks such as tunnelling may not have commenced yet.

The rail projects include the Kaohsiung Mass Rapid Transit (MRT) line valued at Rm3bil with an 88% effective share, secured in October 2023, and the Taoyuan City Underground Railway project, worth Rm1.3bil with a 60% effective share, clinched in October 2022.

The remaining projects in Taiwan are primarily structural-development work such as sea wall reclamation, marine bridges and their extensions, which were reported to be 75%-90% complete as of January.

RHB Research has maintained a “buy” call on Gamuda, with a target price of RM6.30 per share.

The “buy” rating is supported by its current valuation, with Gamuda trading at a 13.9 times price-earnings (PE) multiple of its financial year 2025 (FY25), which the research firm deems unjustified.

RHB Research explained that during the construction upcycle in mid-2017, Gamuda traded at a 16 times PE when its orderbook was only Rm7.8bil compared to Rm24bil now.

Additionally, the research house said Gamuda stands out as the cheapest large-capitalisation counter compared to peers such as Sunway Construction Group Bhd and IJM Corp Bhd.

The research house identified potential re-rating catalysts including faster-than-expected rollouts of projects in Malaysia and Australia, notably the MRT 3 project in Malaysia anticipated in the final quarter of 2024, and the Suburban Rail Loop East tunnelling package in Australia expected to be announced by July.