Gamuda Bhd
Outperform. Target price: RM6.20
GAMUDA’S Australian unit DT Infrastructure Pty Ltd (DTI), via AD Alliance, a JV with Alstom Transport Australia Pty Ltd, a unit of French rail transport giant Alstom, has won a high-capacity signalling project (upgrading of signalling and train control systems) for the rail network in Perth, Western Australia. AD Alliance was one of the two shortlisted bidders in Jun 2023.
We are positive on the latest development. This is GAMUDA’s fifth major contract win in FY24, bringing its YTD contract wins to RM13.3-13.8 billion against its job win target, which is also our assumption, of RM25 billion over two years In FY24 and FY25.
Out of five contract wins, only Taiwan’s Kaohsiung MRT Yellow Line (worth RM3.03 billion) and Singapore’s MRT West Coast Station and Tunnels (worth RM1.77 billion) are confirmed with contract value, while the civil work contracts for Upper Padas Hydroelectric Power Plant (estimated at RM2 billion), Penang LRT Mutiara Line (estimated at RM4.6-5 billion) and HCS project are still under negotiation.
We continue to like GAMUDA for: (i) being the frontrunner for the tunnelling job for the MRT3, (ii) its ability to secure new jobs in overseas markets, (iii) its strong war chest after the disposal of its toll highways, (iv) its strong earnings visibility underpinned by a record outstanding order book of RM24.1 billion (excluding Upper Padas Hydro, Penang LRT and HCS projects), and (v) its inroads into the renewable energy space.
We maintain our forecasts, TP of RM6.20 and OUTPERFORM call. Risks to our call include: (i) delays in the roll-out of key public infrastructure projects in Malaysia such as the MRT3, (ii) rising input costs and labour shortage, (iii) risks associated with operations in overseas markets such as change in government policies towards foreign businesses and forex, and (iv) liquidated ascertained damages (LAD) from cost overrun and delays.