Gamuda announced that, through Gamuda Technologies SB, it has entered into a joint venture (JV) with Dagang NeXchange (DNeX) to provide on-premises Google Distributed Cloud air-gapped Services (GDC Services) to Malaysian government agencies and businesses. Separately, Gamuda is also acquiring a 20% stake in Cloud Space SB, a google Cloud premier partner, for RM18m. The JV company and the purchase of Cloud Space could position Gamuda to tap into the technology services market, valued at RM11bn and RM36bn, respectively. While we view this development positively, we keep our forecasts unchanged for now, pending further details from Management regarding the expansion of its digital infrastructure business. Our Outperform call is retained with a higher SOTP-based target price of RM10.40, as we peg a higher PER of 26x to the construction segment given, encouraging orderbook replenishment prospect boosted by technology services market and a record geographically diversified order book, estimated at RM31.4bn.

• JV with DNeX. Gamuda and DNeX, through their wholly owned subsidiaries, Gamuda Technologies SB and DNeX Solution SB, have entered into a JV to deliver GDC Services, a sovereign cloud solution that offers customers access to Google Cloud's Artificial Intelligence (AI) and cloud technologies in a secure, fully isolated, on-premise environment while meeting the highest regulatory requirements. The GDC Services will encompass the procurement of GDC hardware, providing customized AI solutions, applications, development, ongoing client support, data migration and infra maintenance for clients. Gamuda Technologies SB and DNeX Solution SB will hold 50% equity stakes in the JV company.
• Acquisition of 20% stake in Cloud Space SB, a Malaysian start-up that offers Google Cloud, Google Workspace, Chrome Enterprise, and Google for Education, to government and private sectors in Malaysia. Cloud Space's expertise in cloud engineering enhances Gamuda's in-house technology and digital capabilities in delivering large-scale complex engineering and construction projects. The consideration for the proposed investment is based on valuation range of RM75m-RM90m, subject to the achievement of Cloud Space's financial targets.
• Prospect. The JV company is authorized to act as the sole provider of GDC Services, targeting a market worth over RM11bn, with the primary clients including government entities, both federal and state as well as and private, security-sensitive entities such as financial institutions. The acquisition of 20% stake in Cloud Space SB position Gamuda to tap into a potential RM36bn technology services market, leveraging its advanced technology services focused on cloud and AI capabilities.

Source: PublicInvest Research - 11 Dec 2024