Gamuda to achieve stronger performance in second half of FY24

KUALA LUMPUR: Analysts expect Gamuda Bhd to record stronger profits in second half (2H) of its financial year ending July 31, 2024 (FY2024) due to stronger construction progress and lumpy property revenue.

On Wednesday, Gamuda announced a 7.3 per cent yearon-year (y-o-y) increase in net profit to RM208.80 million for the second quarter ended Jan 31, 2024, as revenue more than doubled to RM3.33 billion from RM1.44 billion previously.

However, for the first halfyear (1H), Its net profit dropped 70.4 per cent y-o-y to RM403.84 million although revenue surged to RM6.14 billion compared to RM2.75 billion in the preceding year’s corresponding period.

In a note today, MIDF Research said the core net profit for the first half-year was below expectations but it still deemed the results to be within its estimates on the back of stronger profits expected in 2H FY2024 from stronger construction progress and lumpy property revenue.

“The management expects a significant increase in sales in 2H FY2024 from lumpy recognitions and with secured bookings of RM600 million being converted to sales. Unbilled sales currently stand at RM6.7 billion.

“Gamuda is expected to launch two new projects by mid-2024, namely Gardens Park (adjacent to Gamuda Gardens) and Eaton Park in Ho Chi Minh, with gross development values (GDV) of RM4.0 billion and RM5.1 billion respectively, both of which are expected to drive future sales,” it said.

However, it noted that the management has slashed its FY2024 property sales target from RM5.6 billion to RM5.0 billion mainly due to its two pieces of land in Hanoi which are expected to take longer to sell.

MIDF Research said Gamuda, nonetheless, remains its top pick for the construction sector, backed by strong overseas expansion plan and consistency in clinching sizeable jobs with the absence of mega projects in Malaysia.

Additionally, it said, Gamuda’s bulging order book of RM24.1 billion provides strong earnings visibility at least over the next three financial years and it is expected to grow larger with expected wins from Australia, data centre jobs and upcoming infrastructure projects such as the Penang Light Rail Transit (LRT), Pan Borneo Highway Sabah and Penang International Airport expansion.

“It is also the front-runner for the Mass Rapid Transit Line 3 (MRT3) tunnelling package with its partner MMC but we reiterate our view that we can expect further delays in terms of contract awards, which has been held back since December 2022.

“The group’s balance sheet also remains healthy with a net gearing of 28.6 per cent, well below its self-imposed limit of 70 per cent. All factors considered, we are maintaining our ‘buy’ recommendation on Gamuda with an upgraded target price (TP) of RM5.98 (previously RM5.55),” it said.