GAMUDA is determined to step up its ESG disclosures and reporting as it is deeply invested in a sustainable future. In our recent engagement with GAMUDA’s chief sustainability officer Ong Jee Lian, we found that the group has made great strides towards its ESG goals. In this report, we highlight the notable progress that the group has made. We reaffirm our OUTPERFORM call on GAMUDA with an unchanged SoP-TP of RM5.15/share. It is our top ESG pick for the construction sector.

Going above and beyond. GAMUDA’s approach to ESG is underpinned by the GAMUDA Green Plan 2025 (GGP 2025). Comprising four pillars - Sustainable Planning and Design for Construction; Our Community and Our Business; Environmental and Biodiversity Conservation; and Enhancing Sustainability via Digitalisation - the GGP 2025 drives the ESG integration across the group. Towards this end, the group is constantly striving to provide more transparent ESG disclosures and targets while improving its assessment of the risks and opportunities, and implementing mitigation measures across all business segments.

GAMUDA’s ESG benchmarks and reporting standards are aligned to the Global Reporting Initiative (GRI), Task Force Climate-Related Financial Disclosures (TFCD), Sustainability Accounting Standards Board (SASB) and UN Sustainable Development Goals (UNSDG). The stock is listed in the Dow Jones Sustainability Index and MSCI Index, and is also among 16 Malaysian listed and private companies committed to the Science Based Targets initiative (SBTi), a partnership between CDP (Carbon Disclosure Project), the United Nations Global Compact (UNGC), the World Resources Institute and the World Wide Fund for Nature (WWF). Companies that have committed to science-based targets must adhere to a rigorous process on how much and how quickly they need to cut their greenhouse gas (GHG) emissions in line with the Paris Agreement goal of limiting global warming to 1.5°C. These efforts are testament to GAMUDA’s commitment to sustainable development.

Maintain OP with an unchanged SoP-based TP of RM5.15. We continue to like GAMUDA given: (i) the good chances of it garnering a significant slice of action in the MRT3; (ii) its international job wins in in Australia and Singapore that speak well for its competitiveness in the international market; (iii) the lumpy proceeds from the disposal of its toll assets, putting it in a strong position to participate in public infrastructure projects on a PFI or deferred payment model, and giving out a special dividend; and (iv) its strong earnings visibility underpinned by record high outstanding order book of RM14b (as of FY22). We also reaffirm our 4-star ESG rating which accorded GAMUDA a 5% premium to its TP as we are convinced the group will continue to raise the bar on its ESG disclosures and reporting. GAMUDA is scheduled to release its annual sustainability report in November.

Risks to our call include: (i) governments cutting back on public infrastructure spending on austerity drive, (ii) delays in the rollout of key public infrastructure projects in Malaysia such as the MRT3, and (iii) delays in the PSI project due to funding/environmental issues.

Source: Kenanga Research - 31 Oct 2022