• Stay BUY and MYR10.52 TP (SOP), 23% upside, 2% FY26F (Jul) yield. Gamuda has received a MYR451m contract from BCEI Malaysia (BCEI) for foundation, civil, structural, and architectural (FCSA) works for one data centre (DC) block in Cyberjaya. This latest job brings the YTD-FY25 new job wins to c.MYR6.7bn vs our full-year job replenishment target of MYR20bn. The job is slated to begin in 4QCY24, with targeted completion by 1QCY26 (around 15-17 months).

• Further details of the job and client. Since GAM’s job scope pertains to the FCSA works on the DC for BCEI, other works such – eg mechanical, electrical, and plumbing – will be handled by the client. Assuming the FCSA works (MYR451m) constitute c.30% of the total construction cost for the DC, its overall cost would be c.MYR1.4bn – translating into a capacity of c.40MW, as per estimates. BCEI is an engineering firm that specialises in planning, design, and construction of IT facilities (including DCs) for Fortune 500 companies. It also secures offtakers for DCs.

• A fast-track job for GAM. Assuming a PBT margin of between 10% and 15% for the MYR451m portion of the DC job, which must be completed below 18 months (rather fast in our view) –we estimate that GAM may recognise a PBT ranging between MYR32m and MYR47m for CY25 alone.

• Execution not a problem. GAM is no stranger to building DCs in Cyberjaya, having completed one c.MYR200m DC with another worth c.MYR300 undergoing construction. Both are for AIMS Group (AIMS). The relatively shorter timeline for completion is facilitated by GAM’s industrialised building system or IBS factories in Sepang and Banting, which can accommodate c.200-300MW of DC projects annually. Recall: The first DC job by GAM for AIMS in Cyberjaya only took around eight months to complete.

• The latest contract award brings GAM’s outstanding orderbook to MYR31.4bn or the low range of the MYR30-35bn by end-CY24 target) with c.MYR2.4bn from DCs. With c.MYR13.3bn worth of new job wins needed to hit our MYR20bn new job wins target for FY25, upcoming anticipated wins may come from the Penang Light Rail Transit and water supply scheme for the Upper Padas Hydroelectric project with the remainder from a mix of local DC jobs and renewable energy works in Australia (Figure 1).

• No changes to earnings estimates, as the latest job win is within our FY25F job replenishment assumption of MYR20bn. Hence, our SOP-derived TP of MYR10.52 (which bakes in an 8% ESG premium) remains. We reaffirm our view that GAM remains undervalued, trading at 17.5x FY26F P/E – close to the 16-17x range seen during the 2017 upcycle when GAMS’ outstanding orderbook was just c.MYR7.4bn vs c.MYR31.4bn now.

• A key risk includes slower-than-expected job replenishment trends.

Source: RHB Securities Research - 4 Nov 2024