GAMUDA has been awarded contracts worth a total of a RM1.74b in relation to the development of a hyperscale data centre in Elmina Business Park, Selangor. With jobs wins of RM15.1b to RM16.0b YTD in FY24, it is on track to surpass its job win target of RM25b over two years in FY24-25. We raise our FY25F net profit forecast by 6%, lift our TP by 8% to RM6.70 (from RM6.20) and maintain our OUTPERFORM call.

GAMUDA has secured contracts worth a total of a RM1.74b in relation to the development of a hyperscale data centre in Elmina Business Park, Selangor, comprising: (i) building works awarded by SIMEPROP (MP; TP: RM1.08) worth RM815m with a contract period from May 2024 to Feb 2026, and (ii) mechanical, electrical and plumbing fit-out works awarded by a local unit of a US-based MNC worth RM928.6m with a contract period from Jul 2025 to Sep 2026.

We are positive on the latest development. This is GAMUDA’s sixth major contract win in FY24, bringing its YTD contract wins to RM15.1b to RM16.0b, on track to surpass its job win target (which is also our assumption) of RM25b over two years in FY24-25.

To recap, out of six contract wins, three are with confirmed contract value, namely Taiwan’s Kaohsiung MRT Yellow Line (worth RM3.03b), Singapore’s MRT West Coast Station and Tunnels (worth RM1.77b) and this data centre project. Meanwhile, the civil work contract for Upper Padas Hydroelectric Power Plant (estimated at RM2b), Penang LRT Mutiara Line (estimated at RM4.6b-RM5.0b) and DT Infrastructure’s high-capacity signalling (HCS) project are still under negotiation.

Forecasts. We raise our FY25F net profit forecast by 6%, having lifted our FY24-25F combined job win assumption to RM27b (from RM25b).

Valuations. Correspondingly, we upgrade our SoP-based TP by 8% to RM6.70 (see Page 2) from RM6.20. Our valuation basis for its construction business is unchanged at 18x FY25F earnings. Our TP also includes a 5% premium to reflect a 4-star ESG rating as appraised by us (see Pages 5).

Investment case. We continue to like GAMUDA for: (i) being the front- runner for the tunnelling job for the MRT3, (ii) its ability to secure new jobs in overseas markets, (iii) its strong war chest after the disposal of its toll highways, (iv) its strong earnings visibility underpinned by a record outstanding order book of RM25.8b (excluding Upper Padas Hydro, Penang LRT and HCS projects), and (v) its inroads into the renewable energy space. Maintain OUTPERFORM.

Risks to our call include: (i) delays in the roll-out of key public infrastructure projects in Malaysia such as the MRT3, (ii) rising input costs and labour shortage, (iii) risks associated with operations in overseas markets such as change in government policies towards foreign businesses and forex, and (iv) liquidated ascertained damages (LAD) from cost overrun and delays.

Source: Kenanga Research - 27 May 2024