Gamuda Bhd

Buy. Target price: RM6.30

GAM’S construction arm recorded a PBT of RM270 million (+2% YoY) for 1H FY24 as overseas projects (particularly from Australia) played a role in adequately filling up the void from the domestic job front. With overseas projects (that have relatively lower margins vs domestic jobs) now making up 87% of construction revenue – the lower PBT margin of 5.8% in 1H FY24 (1H FY23: 10.8%) was of no surprise. Moving forward, we expect construction margins to be sequentially higher amidst the ramp up in local projects (with higher margin) such as the Silicon Island reclamation job with two new larger dredgers on its way and the Sungai Rasau Water project.

The property segment saw a 39% YoY growth in PBT for 1H FY24 with domestic projects making up 70% of sales. We envisage property earnings to be stronger in 2H FY24 due to lumpy recognitions (particularly from Singapore and London) plus RM600 million of bookings to be converted into sales. Moreover, the property arm’s unbilled sales stand at RM6.7 billion (end-1H FY24) vs RM5.4 billion (end-1H FY23).

GAM’s construction orderbook stood at RM24 billion as of endJanuary (c.4x cover ratio). The group has secured RM4.8 billion worth of new jobs for YTD-FY24 with the Upper Padas Hydroelectric Dam potentially adding at least another RM2-3 billion to the orderbook (pending financial close). Local jobs such as the Bayan Lepas Light Rail Transit (construction cost: RM6-7 billion) and Pan Borneo Highway Sabah Phase 1B (estimated average value of one package: RM600-800 million) may likely be dished out by end-FY24.

Keep BUY, with new SOP-based RM6.30 TP from RM6.46, 20% upside and 2% FY24F (July) yield.