In less than two weeks, GAMUDA secured its 3rd contract - to build a data centre block worth RM451.4m in Cyberjaya for BCEI, a US-based specialist in data centre development. This brings its outstanding order book to RM31.4b, nearing its end-CY24 target of RM30b-RM35b. We remain optimistic on GAMUDA as contract flow will keep coming with Penang LRT, several data centre awards and Australia projects in the pipeline. We reaffirm our OP rating at a TP of RM9.20.

A RM451m Core and Shell Work for data centre in Cyberjaya. Last Friday, GAMUDA announced that it has secured the foundation, civil, structural and architectural (FCSA) works, worth RM451.4m, from BCEI Malaysia Sdn Bhd (BCEI) to build a data centre block in Cyberjaya. This fast-tracked project has a scheduled completion by 1QCY26. BCEI, a US-based industry-leading engineering consultant that specialises in the planning, design, and construction of Information Technology (IT) facilities for numerous Fortune 500 companies.

Forth contract win in FY25. Although this is just a "core and shell" work, we view this contract win positively as it demonstrated its ability to secure data centre project. With this project, its YTD contract wins have increased to RM6.67b from RM6.22b and its outstanding order book to RM31.4b from RM31.0b, against its targeted outstanding order book of RM30b-RM35b by end-CY24. Management has guided PBT margin for this project within the range of 10%-15% vs. the usual 10% for local projects, due to the accelerated nature of this project.

Forecasts. Maintained with new job win assumption retained at RM14.5b and RM15.0b for FY25 and FY26, respectively, supported by a pipeline that includes the Penang LRT Mutiara Line, several data centre awards, and projects in Australia, for the remainder of FY25.

Valuations. We maintain our SoP-based TP of RM9.20 (see Page 2) that values its construction business at 22x FY26F PER and includes a 5% premium given its 4-star ESG rating as appraised by us (see Page 6).

Investment case. We like GAMUDA for: (i) being in the driver's seat for the Mutiara Line of the Penang LRT, (ii) its ability to secure new jobs in overseas markets, (iii) its strong war chest after the disposal of its toll highways, (iv) its strong earnings visibility underpinned by a record outstanding order book of RM31.4b (excluding Penang LRT), and (v) its inroads into the renewable energy space. Maintain OUTPERFORM.

Risks to our call include: (i) delays in the roll-out of key public infrastructure projects in Malaysia such as the MRT3, (ii) rising input costs and labour shortage, (iii) risks associated with operations in overseas markets such as change in government policies towards foreign businesses and forex, and (iv) liquidated ascertained damages (LAD) from cost overrun and delays.

Source: Kenanga Research - 4 Nov 2024