Review

• Excluding gain on disposal of investment property of RM6.7mn and gain on foreign exchange of RM1.3mn, GAMUDA's 1QFY24 core profit of RM187.0mn came in within our expectations but below the consensus forecast, accounting for 20.2% and 18.4% of ours and consensus full-year estimates.

• The group declared a first interim dividend of 6.0sen/share, maintaining the same amount declared in the corresponding period last year.

• YoY, 1QFY24 core profit grew 32.9% to RM187.0mn while revenue surged 114.6% to RM2,804.7mn. The stronger earnings performance was mainly driven by both construction and property divisions. The core PBT of the construction division increased 19.3% to RM133.0mn from RM111.5mn, thanks to higher contributions from overseas jobs. Meanwhile, the property division saw its core PBT jump 45.8% to RM106.8mn from RM73.2mn a year earlier due to better margins.

• QoQ, 1QFY24 core profit fell 25.7% to RM187.0mn while revenue was 17.9% lower at RM2,804.7mn. The weaker earnings performance was mainly due to the high base effect as well as lumpy earnings from the property division a quarter ago.

• Separately, the group has won another MRT job worth SGD509.6mn (RM1.8bn) in Singapore. The contract includes constructing 1 underground station and 2 tunnels, covering approximately 1.9km for the West Coast Station. The project is expected to commence on 1Q2024 and be completed by 2032. Briefing highlights Construction

• With the new job win in Singapore, GAMUDA’s outstanding construction order book jumped to another record high of RM25.8bn. This robust outstanding order book can provide earning visibility up to FY28.

• For the Sydney Metro West-Western Tunnelling Package, the progression remains intact. The group had recently secured some new variation orders. As of the end of October 2023, the project had reached 39.0% completion.

• For the MRT3 project, the tender validity has been extended to March 2024. Meanwhile, management revealed that the Penang LRT project has become a high-priority project for the Federal Government. The project is expected to roll out in 3-4 months. For the Penang South Island project, 3 acres of land have been reclaimed so far.

• Pertaining to the hydroelectric power plant project in Sabah, the final details of the project and the power purchase agreement will be announced before mid-2024. The groundbreaking ceremony is scheduled to take place today. To recap, GAMUDA had formed a JV with Sabah Energy Corporation and Kerjaya Kagum Hitech to develop a 187.5 MW hydroelectric power plant in Tenom, Sabah, with an estimated project cost of RM4.0bn. Property Development

• The property division recorded sales of RM454.0mn in 1QFY24, a 5.4% YoY drop versus RM480.0mn achieved in 1QFY23. Despite a slow start, the management remains confident that the property division will pick up in the upcoming quarters in order to achieve the sales target of RM5.6bn for FY24.

• As of the end of October 2023, the unbilled property sales stood at a record high level of RM6.7bn.

Impact

• Maintain FY24 to FY26 earnings forecasts.

Outlook

• Generally, we expect the group to deliver another decent quarter ahead, backed by its record-high outstanding order book and properties unbilled sales.

Valuation

• No change to our target price of RM5.19, based on SOP valuation. Maintain Buy on GAMUDA.

Source: TA Research - 7 Dec 2023