Gamuda, together with its Taiwanese partner, Asia World Engineering & Construction Co. (AWEC) was awarded Package YC01 of Kaoshiung Mass Rapid Transit (MRT) Yellow line worth NTD23.4bn (approx. RM3.5bn) from Taiwan Kaohsiung City Government. Based on Gamuda’s 88% stake in the JV, the effective contract value to the Group is RM3.03bn. With this new job win, the Group’s outstanding orderbook now amounts to RM24bn and also about 23.3% of our FY24F orderbook replenishment target. We allude to this win in our earlier report as Gamuda’s track record in the region would bring opportunities especially rapid rail infrastructure projects. All told, we believe Gamuda’s orderbook replenishment target from Taiwan has been fulfilled for the year hence, we are leaving our forecasts unchanged. To note, this is also within our FY24F orderbook replenishment assumption of RM13bn. Thus, we retain our Outperform rating with an unchanged sum-of-the-parts derived TP of RM5.00, pegged at 15x PER sector average.

• Project details. The Kaoshiung MRT Yellow line has a total alignment of 22.9km with 22 stations. It would be the first urban passenger rail in Asia Pacific region to deploy Stadler’s rolling stock – Stadler is a Swiss locomotive manufacturer which has strong presence in Europe and United States.

• Gamuda’s scope of works for this project involves the design and build of a 3.5km underground twin-bored tunnels with 3 underground stations and 0.9km elevated tracks with 1 elevated station accompanied by 2 crossovers and cross passages. Construction works is estimated to begin in 2QFY2024 and would be completed by 4QFY2032 (107 months, or 9 years). Contract sum net to Gamuda is at NTD20.6bn or equivalent to c. RM3.03bn (total contract under JV with AWEC is NTD23.4bn or RM3.45bn).

• Less than 1% impact to bottomline in FY24-26F. Accounting this job win, the Group’s unbilled existing order book added 14.4% to c. RM24bn. Assuming a high single-digit margin and a corporate tax rate of 20% in Taiwan, we expect this project would contribute less than 1% in net profit based on certain levels of work completion each year, due to the duration of the project (approximately 9 years). As compared to Package C04 of Kaoshiung Orange line worth c. RM1bn which Gamuda has participated in 2002, the package took about 4 years to complete. All said, we make no adjustment to our earnings estimates, considering this a part of our RM13bn orderbook replenishment assumption in FY24F

Source: PublicInvest Research - 26 Oct 2023