Gamuda's 1QFY25 net profit grew by 5.3% YoY to RM205.4m as revenue jumped on improved contributions from all segments. However, the results were below our and consensus expectations, accounting for only 14.6% and 16.9% of full year estimates, respectively. The discrepancy in our numbers was primarily due delayed rollout of high-impact local infrastructure projects (i.e. Penang LRT, Ulu Padas Hydroelectric project, the Sabah water project, and the Pan Borneo Highway), high initial mobilization costs for its overseas projects, and new Quick Turnaround Projects (QTPs) that are still in the early stages. In view of the robust orderbook at RM30bn, improving margin, and an expanding projects pipeline in both overseas and local market, boosted by booming data centre, we maintain our earnings forecasts for now. We remain optimistic over the Group's promising prospects and retain our Outperform rating on Gamuda, with unchanged SOTP-based TP of RM10.40.

• 1QFY25 revenue increased by 47.5% YoY, primarily driven by stronger engineering & construction (E&C) revenue from overseas and domestic projects. Gamuda's E&C revenue from overseas project grew 19.7% to RM2.3bn, accounting for 73% of the total E&C division revenue (1QFY24: 84%). This growth was anchored by the higher work progress of the Australian projects, boosted by the recently acquired DT Infrastructure. Domestic E&C revenue rose by 135% to RM0.8bn, driven by projects such as Penang reclamation works. Meanwhile, property revenue increased by 82% to RM1.1bn, driven by sales from its overseas operations, which grew by 153% YoY to RM0.6bn and accounted for 57% of the total property division revenue (1QFY24: 41%).
• 1QFY25 net profit grew by a modest 5% YoY, primarily driven by stronger contribution from its E&C divisions. Net profit for overseas and domestic E&C increased by 10.4% and 31.9%, respectively, in line with higher revenue. This was partly offset by a decline in net profit from the property division (-17.1% YoY), mainly due to a 54% YoY drop in overseas property contribution following the completion of Vietnam's Celadon City at end of last year, despite a significant 389% earnings growth in domestic property. Nonetheless, overseas property earnings are expected to improve as building progress accelerates at recently launched QTPs including Vietnam's Eaton Park Phase 2, which was fully sold within a week of its launch.
• Prospects. Gamuda's outstanding construction orderbook reached an all time-high estimated at RM30bn, providing earnings visibility for the next 2-3 years. The Group's near-term performance is expected continued being driven by overseas construction activities as projects in Australia and Taiwan continue to gain momentum. In Australia, Gamuda has been shortlisted for multiples opportunities in the solar and pumped hydro segments. Looking ahead, the Group expect new projects wins to come from domestic including the Penang LRT and Ulu Padas Water Project, as well as data centre projects with better margins to drive its E&C earnings. On the properties front, unbilled sales are now estimated at RM6.0bn. The division is targeting RM6bn in sales (+20% YoY) for FY25 and plans to incorporate 2 or 3 QTPs annually, in addition to the 10 QTPs currently in its portfolio. Meanwhile, Gamuda is making significant strides in the cloud business, adopting a value added-approach to serve clients across the private and public sectors, targeting a market valued at RM36bn.

Source: PublicInvest Research - 13 Dec 2024