KEY INVESTMENT HIGHLIGHTS

• Wholly owned subsidiary DTI awarded 585MW solar farm project in New South Wales, Australia
• To complete civil, structural and electrical works in 24 months; PBT margin 4% to 5%
• Strong order book at RM31.8b, well within CY24 target of RM30b to RM35b
• Maintain BUY with an unchanged TP of RM10.68

DTI wins solar farm project. Gamuda Bhd's wholly owned Australian subsidiary DT Infrastructure was awarded a AUD625m (RM1.8b) engineering, procurement and construction (EPC) contract from Lightsource bp Renewable Energy Investments Ltd to construct the 585MW Goulburn River Solar Farm in the Upper Hunter Region of New South Wales.

Project details. DTI will be involved in the civil, structural and electrical infrastructure required for the solar farm. The project is expected to commence on 1st January 2025 and will take 24 months to complete, or by Dec-26. Pretax margins are expected to be in the range of 4% to 5%. Once operational, the solar farm is expected to generate enough renewable energy to power about 225,000 homes and cut carbon emissions by 910,000 tons annually.

RM40b to RM45b order book by end 2025. With the new win by DTI, Gamuda's outstanding order book rises to RM31.8b, well within management's target of RM30b to RM35b by end CY2024 and on track for its RM40b to RM45b target by end CY2025, after taking into account an expected burn rate of RM12b to RM13b annually. Upcoming project awards that are expected to provide an extra boost to Gamuda's already bulging order book include the Penang LRT, a water supply scheme in Sabah, and the potential conversion of several renewable energy early contractor involvement (ECI) into EPCC contracts in Australia.

Earnings estimates. We are making no changes to our earnings estimates.

Target price. We are also maintaining our TP of RM10.68, derived by pegging Gamuda's FY26F EPS of 52.1 sen to a PER of 20.5x, based on +2SD above its long-term mean, which we believe is justifiable given its growing prospects in the construction space with an all-time high outstanding orderbook of RM31.4b and its upcoming inclusion into the FBM KLCI starting 23rd December.

Maintain BUY. We are positive on Gamuda's latest win through DTI in Australia, and we believe both Gamuda Australia and DTI would be able to tap on the growing number of RE jobs down under. Management has recently guided that their tender book for Australia's RE space was at AUD25b over two years. Gamuda remains our favourite for the construction sector, backed by its successful overseas expansion plan; its its consistency in clinching sizeable jobs and it being a front runner for most mega projects in Malaysia. All in, we are maintaining our BUY recommendation on Gamuda.

Source: MIDF Research - 17 Dec 2024