Gamuda reported a stronger quarter with 3QFY23 net profit of RM235.7m (+5.5% YoY, +12.9% QoQ), mainly driven by stronger performance in overseas projects. However, cumulative 9MFY24 net profit of RM639.6m (+13.6% YoY) is still below our and consensus expectations, accounting for only 51.2% and 57.7% of respective full year estimates. We believe the Group’s performance would catch up in the subsequent quarter, supported by higher contribution from domestic engineering and construction (E&C) division, better margins in overseas’ E&C operations and lumpy revenue recognition from its overseas JVs property project. While we keep our earnings forecasts unchanged, we peg a higher PER of 17x to the construction segment given the positive outlook on the stock and sector valuation upswing. Consequently, our TP raised to RM6.80. However, due to limited upside of +4.6%, we cut our rating to Trading Buy. On a side note, second interim dividend of 10sen per share was declared for the quarter.

• 3QFY24 revenue increased 20.5% YoY to RM2.5bn, mainly driven by strong overseas performances at both E&C and properties division. The Group’s E&C revenue from overseas projects doubled to RM2.2bn, accounted for 87% of the total E&C division revenue (3QFY23: 78%). Properties division’s revenue surged to RM1.3bn (+75.9% YoY, +34.3% QoQ), underpinned by both overseas and domestic projects. Overseas activities accounted for 64.7% of the total properties’ division revenue (3QFY23: 47.2%).

• 3QFY24 net profit improved 5.5% YoY to RM235.7m, mainly attributed stronger performance in overseas projects. The Group’s E&C posted sequentially better earnings at RM124.8m (-0.3% YoY, +2.9% QoQ) as overseas earnings doubled to RM86.1m in line with higher revenue, and offset the decline in domestic construction. Properties division earnings improved to RM111.0m (+13% YoY, +26.9% QoQ) driven by better profitability in both local and overseas operations.

• Prospects. The Group’s near-term performance will be driven by overseas construction activities as projects in Australia and Taiwan continue to pick up pace. The Group expects new project wins to pick up in coming quarters to meet its RM25bn project replenishment target for FY24/25. For its properties division, the Group launched 2 new projects namely Gardens Park (RM4bn GDV) and Eaton Park @ Ho Chi Minh City (RM5.1bn GDV) to drive future sales. Besides that, the Group also intends to add another 2 QTPs in 2024, on top of 8 QTPs in its portfolio currently.

Source: PublicInvest Research - 26 Jun 2024