GAMUDA's Australian unit, DT Infrastructure (DTI), has secured its 2nd job for FY25 with an EPCC contract for a solar farm worth AUD625m in New South Wales, equivalent to RM1.8b, bringing the group's outstanding order book to RM31.8b, essentially within its goal of end-CY24 outstanding order book of RM30b−RM35b.

While this is not DTI's first rodeo in solar, it is Gamuda's maiden solar farm win there (via DTI), building up its credentials in renewable energy, following an earlier wind farm award in September. We stay optimistic on GAMUDA on its job prospects and reaffirm our OP rating with an unchanged TP of RM10.80.

Secured RM1.8b EPCC for solar farm in Australia; potentially BESS to follow in our view. Yesterday, GAMUDA announced that its wholly-owned DT Infrastructure Pty Ltd (DTI) has been awarded an EPCC contract worth AUD625m (c.RM1.8b) from Lightsource bp Renewable Energy Investments Ltd for the 585MW Goulburn River Solar Farm, in the Upper Hunter Region of New South Wales, Australia. The construction job is scheduled to start from Jan 2025 over a period of two years. According to Australia New Zealand Infrastructure Pipeline (ANZIP), the Goulburn River solar farm is to also have a battery energy storage system (BESS) delivery, which we believe could be tendered out in later stages (link).

The 5th contract win in FY25. We remain bullish on GAMUDA given its ability to secure new jobs. With this fifth job win in FY25, it has secured a total contract worth RM8.47b YTD against our new job win assumption of RM14.5b. This is also the second job bagged for DTI in FY25. Although the pre-tax margin of 4%−5% is lower than Malaysian's 10%, we are comfortable given its relatively low risk profile. The project was awarded by Lightsource BP, a leading global solar energy company, fully acquired by BP in 2024.

More contracts in the pipeline. With this job win, its current outstanding order book has increased to RM31.8b, well within its end- CY24 target of RM30b−RM35b. Other jobs in the pipeline include Penang's LRT Mutiara Line, Sabah's water treatment plant, several data centre awards and projects in Australia. It also maintains its end- CY25 outstanding order book target of RM40b-RM45b.

Forecasts. Maintained, based on assumption of new job wins of RM14.5b and RM17.0b for FY25 and FY26 respectively.

Valuations. We maintain our SoP-based TP of RM10.80 (see Page 2), or ex-bonus TP of RM5.40 that values its construction business at 22x FY26F PER and includes a 5% premium given our 4-star ESG rating (see Page 6). This is despite our FY25 earnings revision as our valuation is based on FY26 numbers.

Investment case. We continue to like GAMUDA for: (i) being in the driver's seat for the Mutiara Line for the Penang LRT, (ii) its ability to secure new jobs in overseas markets, (iii) its solid war chest after the disposal of its toll highways, (iv) its strong earnings visibility underpinned by a record outstanding order book of RM30.0b, and (v) its inroads into the renewable energy space. Maintain OUTPERFORM.

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

Source: Kenanga Research - 17 Dec 2024