• Take Profit (TP: RM6.53). Gamuda Berhad (Gamuda) reported a 9MFY24 core net profit of RM639.6mn, which aligned with our expectations but fell below consensus estimates, accounting for 81.8% and 65.0% respectively. YoY revenue, excluding contributions from joint ventures, surged by 79.1% meanwhile the company’s building on a 13.6% increase in net profit, upon exclusion of discontinued highway operations from the preceding year. The earnings growth was primarily driven by stronger overseas performance across both the construction and property divisions. Overseas operations continued to be the primary growth driver, contributing 77%, led by significant projects in Australia within the construction division. Meanwhile, the property division demonstrated improved margins domestically with 47% and 31% increase in revenue and net profit respectively. We maintain a positive outlook on Gamuda's prospects, underpinned by robust growth in overseas revenue and a promising pipeline of upcoming projects, supported by an outstanding orderbook expected to exceed the RM25bn target. Given the recent rise in its share price, we believe the stock is now fairly valued. Therefore, we recommend Take Profit on Gamuda as it has reached our valuation of SOP-derived TP of RM6.53.

• Key highlights. In 3QFY24, excluding JV, the company's revenue surged by 20.5% to RM2.5bn, compared to RM2.1bn YoY. Meanwhile Gamuda's net profit also increased by 6.6% to RM235.8mn, up from RM223.4mn recorded in the corresponding quarter. Notable 30% declined in domestic earnings was primarily attributed to the completion of the MRT2 project. This is further being dragged by the delays in regulatory approvals for several domestic projects, namely Penang LRT and Upper Padas Hydroelectric Power Plant in Sabah. Nevertheless, Gamuda announced a higher second interim dividend of 10sen, which raises the full-year dividend to 16sen and corresponds to a dividend yield of 2.5%.

• Earnings Revision. Unchanged.

• Outlook. Looking ahead, Gamuda is poised for improved margins driven by a balanced contribution from both domestic and international projects. At domestic front, significant developments nearing finalisation, namely the Penang LRT, Upper Padas Hydro projects and potential involvement in the Northern Coastal Highway as well as Penang International Airport expansion, are expected to play pivotal roles. The company’s overseas growth is set to gain momentum with an expanded project lineup in Australia, where four projects are currently shortlisted and with tender announcements expected in the 2HCY24. Furthermore, leveraging its wholly-owned Australian subsidiary, DT Infrastructure (DTI), Gamuda has been selected as preferred proponent role for the High-Capacity Signalling (HCS) project in Perth. Meanwhile, for its property segment, Gamuda stands to benefit from a robust RM6.7bn in unbilled sales. This growth trajectory is bolstered by the upcoming launch of Gardens Park, boasting a RM4bn gross development value (GDV) and the recent addition of two new Quick Turnaround Projects (QTPs), namely Springville (RM1.9bn GDV) and The Meadows (RM0.4bn GDV).

Source: BIMB Securities Research - 26 Jun 2024