Gamuda FY22 core net profit jumped 37% YoY attributable to higher revenue contribution from the engineering & construction (+200% YoY) and property development segment (+>100% YoY), on the back of a record-breaking construction orderbook of RM14.4bn and astounding property sales, which up more than 10-fold YoY (+1,449%). FY22 core net profit was above ours and consensus estimates, accounting for 108.9% and 118.9% respectively. We adjust our FY23-24F forecast by +6.3% and -6.2% respectively to account i) higher contribution from MRT2 project in FY23 due to cost savings as the project approaching full completion, ii) higher property sales margin from Quick Turnaround Projects, and iii) slower progress of the MRT3 project in FY24F. Our Outperform rating is maintained with a revised sum-of-parts TP of RM4.30 (from RM3.94 previously) as we rollover our valuation base in FY24. Gamuda to announce special dividend of RM0.38 per share upon receipt of cash proceeds from Amanat Lebuhraya Rakyat (ALR).

• FY22 revenue up 44.7% YoY, due to the jump in its engineering & construction (+200% YoY) and property development segment (+>100% YoY). To recap, Gamuda has successfully replenished a total of 4 projects in the current FY, with an aggregate value of RM11.7bn. Outstanding orderbook is now at a record-high RM14.0bn, providing earnings visibility for the next 4 years based on FY22’s construction revenue of RM3.3bn. On the other hand, its bullish property revenue was driven by sales of its domestic matured townships – Gamuda Cove (+255%) and Gamuda Gardens (+56%).

• FY22 core net profit added 37% YoY. Despite higher cost of sales, core net earnings were higher due to higher share profit from joint venture particularly from MRT2 project as profitability was boosted by cost savings given the project edges towards full completion, as well as lower financing cost and depreciation charges. Moving forward, we expect cost margin to improve as demand slows down. Evidently, cost of building materials has retreated ~2.8ppts as of Aug 2022.

• Our view. With ALR sealed into completion, Gamuda will be in net cash position of RM0.6bn which will put the Group at an advantage in the upcoming MRT3 tender which requires 10% upfront cost (approx. RM1bn for Package CMC03). In addition, Management has revealed to strategically expand its construction footing in Australia given the country’s infrastructure boom – the Australian Government allocated AUD248bn over the next 4 years to 2024/2025. As-to-date, Gamuda was shortlisted for the RM6.1bn Northeast Link Road and ~RM13bn Suburban Rail Loop projects in Melbourne.
  Other sizeable projects include the Island A Penang South Reclamation valued at around RM4bn – RM4.5bn which is expected to kick-start in 1QFY23. On property front, the division targets to grow presales at a CAGR of 30.5% in between FY22-FY25 to RM6bn through Quick Turnaround Projects (QTPs). QTPs requires less capital, have shorter investment horizon yet deliver commendable returns. All in all, we are confident that Gamuda would make another breakthrough in the next financial year and remains a construction darling as the Group ventures into the international construction space coupled with its strong execution track record.

Source: PublicInvest Research - 30 Sept 2022