• Gamuda’s JV with Asia World Engineering & Construction Co (AWEC) has been awarded a construction contract for Package CJ18 of the TaoYuan City Underground Railway Project at Taiwan R.O.C by the Taiwan Ministry of Transportation and Communications’ Railway Bureau yesterday.

• The package for the PingZhen Commuter Station, worth NTD14.5bil (or RM2.13bil), is awarded to a 60:40 JV between Gamuda and AWEC. Hence, the expected revenue for Gamuda is NTD8.7bil (or RM1.3bil). We estimate Gamuda’s share of PBT from this project to be RM102mil.

• The project involves the construction of a 3.7KM underground twin bound railway track with an underground commuter station, and it will be carried out over 96 months (8 years). According to Gamuda, the main risk for the project will be the current tight labour market situation.

• Nevertheless, our forecasts are unchanged as this award is within our FY23F order book replenishment assumption of RM16bil. We expect new contracts to come from Australia (Suburban Rail Loop East and North East Link projects) and Malaysia (CMC303 of Mass Rapid Transport 3, reclamation of Penang South Island and flood mitigation projects).

• Gamuda currently trades at a fair 13.6x FY23F PE, near its 5-year average of 12.9x. Hence, we maintain our HOLD rating.

Source: AmInvest Research - 28 Oct 2022