• Keep BUY and MYR11.67 TP, 22% upside and 2% FY25F (Jul) yield. Gamuda's subsidiary, DT Infrastructure (DTI) was awarded with a AUD625m (c.MYR1.8bn) contract by Lightsource bp Renewable Energy Investments (Lightsource) for civil, structural and electrical infrastructure of the Goulburn River Solar Farm (GRSF) in New South Wales (NSW), Australia with an expected 4-5% PBT margin. DTI's latest solar energy segment job ties in well with the group's aim to build up to 2GW portfolio (now at 813MW as per our calculations) of wind and solar projects within five years in Australia.
• Details of the solar farm. The GRSF project has a capacity of 585MW and will provide a significant source of renewable energy (RE) to 225k homes in NSW with the commencement in Jan 2025 (a two-year period). We envisage execution risk to be manageable as Lightsource is involved in several solar projects across Australia that is equipped with a battery energy storage system (BESS): i) Lower Wonga Solar (305MWdc) and Sandy Creek Solar (840MWdc), among others. Moreover, DTI itself has a track record in a solar farm project called the Chichester Solar Farm (60MW) in Western Australia.
• Orderbook impact. Post new job win - GAM's outstanding orderbook is estimated to be at MYR31.8bn with YTD-FY25 new job wins standing at MYR8.5bn (vs our FY25 job replenishment target of MYR25bn). Based on our estimates, GAM's orderbook related to RE (including the Upper Padas Hydroelectric Project in Sabah) is MYR4.7bn, or 15% of its total outstanding orderbook.
• RE prospects in Australia. GAM has AUD25bn worth of RE projects in Australia it is eyeing - which sits well with the need for 6GW of wind and 6GW of solar power annually for the next 4-5 years to meet Australia's 82% RE target mix by 2030. Other remaining types of RE jobs in Australia that GAM can potentially win mainly include BESS and transmission lines for RE zones. Other upcoming wins that could enable GAM to meet our MYR25bn new job wins target include the Penang Light Rail Transit (based on a 60% share of GAM's share in SRS consortium), the Sabah water supply scheme for Upper Padas Hydroelectric Project, railway-related jobs in Australia, and possibly a few more data centres (DCs) as GAM is able to handle eight DC jobs concurrently, with only three DC jobs on hand at the moment.
• No changes to our earnings estimates as the latest job win is within our FY25 job replenishment assumption of MYR25bn. As such, our SOP-derived TP of MYR11.67 (which bakes in an 8% ESG premium) remains unchanged. We reaffirm our view that the stock remains undervalued, trading at a FY26F P/E of 18.9x which is not far from the 16x P/E seen during the 2017 upcycle when its outstanding orderbook was just MYR7.4bn vs the latest estimated MYR31.8bn.
• Rerating catalysts include frequent wins of new DC jobs in Malaysia.
• A key risk is slower-than-expected job replenishment trends.

Source: RHB Securities Research - 17 Dec 2024