• Gamuda, in partnership with MiTAC Information Technology Corp. and Dong Pi Co. Limited, won a NTD32.0bn (c.RM4.3bn) contract for the Xizhi Donghu MRT project in Taiwan, adding RM3.2bn to its orderbook.

• The project involves constructing a 5.78km railway track with six elevated stations, along with supplemental works including the Xizhi Donghu Line Maintenance Depot and two MRT extensions, valued at c.RM8.1bn to the company.

• Gamuda's orderbook now stands at RM28.7bn, reinforcing its CY24 target of RM30-35bn, supported by other key projects namely Mutiara Penang LRT and Upper Padas Hydroelectric.

• We reiterate our BUY recommendation on Gamuda with higher SOP-derived TP of RM9.82 (from RM9.50), implies a 21x PER on FY25F EPS

Boosting Orderbook to RM28.7bn

Gamuda, in partnership with MiTAC Information Technology Corp. and Dong Pi Co. Limited, recently secured a turnkey contract valued at NTD32.0bn (c.RM4.3bn) for the Xizhi Donghu Mass Rapid Transit (MRT) project in Taiwan. The contract encompasses the construction of a 5.78km railway track featuring six elevated stations between Taipei's Neihu District and New Taipei City's Xizhi District. With a 75% stake in the joint venture, Gamuda’s share of the project adds RM3.2bn to its orderbook, raising the total from RM25.5bn to RM28.7bn. In addition to the primary scope, includes predetermined supplemental works over its 7-year construction period. These include the development of the Xizhi Donghu Line Maintenance Depot and system and track works for two extension lines (i.e. the Keelung Line MRT and the Minsheng Line MRT). The additional works are valued at c.RM8.1bn (75% of the total RM10.8bn) and will be executed upon instruction from the New Taipei City Government. The remaining supplementary works are expected to commence within the next three years, providing further upside to Gamuda's orderbook.

Successful Bid Accelerates Path to Orderbook Target

The new win strengthens Gamuda's prospects of achieving its CY24 orderbook target of RM30-35bn, which we deem on track. This target is expected to include significant projects such as the Mutiara Penang LRT (c.RM4.8bn), Upper Padas Hydroelectric Project (c.RM2.0bn), data center contracts (c.RM3.0bn), and various infrastructure projects in East Malaysia. This new win marks its largest project secured in Taiwan thus far. To recap, Gamuda has an established presence in the region, having completed the Kaohsiung MRT Orange Line in 2008, and is currently working on major projects namely Taoyuan City Underground Railway (RM2.1bn) and the Kaohsiung MRT Metropolitan Yellow Line (RM3.5bn). The new win is anticipated to commence in FY25. With an assumed PBT margin of 8.0%, we expect the project to contribute circa RM49.4mn to bottomline (c.3.0% of our FY25 forecast).

Maintain a BUY with higher TP of RM9.82 (from RM9.50)

At present, Gamuda's construction orderbook is heavily skewed towards overseas projects, which make up 75.6% of the total orderbook (Chart 1). Projects from Taiwan now represents 26.1% of the outstanding orderbook, surpassing its domestic portfolio and highlighting the company’s less reliance on domestic contracts to drive growth. Note that it has an orderbook replenishment target of RM40-45bn in CY25. We raised the P/E valuation for Gamuda’s construction segment to 24x from 22x, justified by orderbook expansion through its successful venture in foreign market. We remain our bullish outlook on Gamuda and reiterate our BUY call with higher SOP-derived TP of RM9.82 (from RM9.50). We continue to like Gamuda due to: 1) a strong earnings outlook bolstered by substantial outstanding orderbook of RM28.7bn and RM7.7bn unbilled property sales; 2) the company's solid presence in the overseas construction market; and 3) the promising rollout of domestic infrastructure projects.

Source: BIMB Securities Research - 23 Oct 2024