GAMUDA, via a JV with a local partner, has won the AUD1.03b (RM3.03b) construction job for the northern section of the M1 Motorway extension in New South Wales (NSW), Australia. This third Australian job for GAMUDA in secured recent years has boosted further its stature as an international contractor. The latest job win raises its outstanding construction order book by 8% to a record RM16b. We maintain our forecasts (as we have already assumed significant jobs win in FY23), TP of RM5.15 and OUTPERFORM call.

GAMUDA, via a 40:60 JV with Australia-based construction giant John Holland Pty Ltd, has secured an AUD1.03b (RM3.03b) contract from the New South Wales government to design and construct the northern section of the M1 Motorway extension from Black Hill to Tomago. GAMUDA’s effective share in the contract is AUD411m or RM1.21b.

The job spanning over six years comprises the construction of: (i) a 10-km greenfield dual carriageway motorway between the M1 Motorway at Beresfield and Tomago, (ii) major interchanges at Black Hill, Tarro and Tomago, and (iii) nine bridges including a 2.6km viaduct across the Hunter River and floodplain.

The third Australian job of GAMUDA has boosted further its stature as an international contractor. We are positive on the new job win that has boosted its YTD job replenishment to RM2.5b or 16% of our FY23F order book replenishment of RM15.5b, and its outstanding order book by 8% to a record RM16b. GAMUDA guided for a PBT margin of mid-to-high single-digit which is consistent with our assumption of 9%.

For the rest of the FY, we expect potential awards from: (i) the MRT3, (ii) PSI, and (iii) overseas markets including Australia (Suburban Rail Loop), Singapore and Taiwan.

No change to FY23-24F earnings as the new win is within our replenishment assumption.

Maintain OP with unchanged SoP-TP of RM5.15 based on 18x PER for its construction segment. We continue to like GAMUDA given: (i) the good chances of it securing the MRT3; (ii) its recent job wins in in Australia, Singapore and Taiwan that speak eloquently for its competitiveness in the international market; (iii) its net cash position as of 1QFY23 providing it an edge to participate in public infrastructure projects on a PFI or deferred payment model; (iv) its strong earnings visibility underpinned by a record high outstanding order book of RM16b; and (v) its efforts to expedite growth in the renewable energy space in line with global sustainability goals. There is a 5% premium accorded to its TP given a 4-star ESG rating as appraised by us (see Page 5).

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 MRT3, (iii) delays in the PSI project due to funding/environmental issues.