Review

• GAMUDA's FY23 core profit of RM804.7mn came in above our expectations but within the consensus forecast, accounting for 114.3% and 99.4% of ours and consensus full-year estimates. The positive variance was mainly attributed to stronger-than-expected profit contributions from the construction division.

• YoY, FY23 core profit grew 0.5% to RM804.7mn while revenue surged 60.1% to a record high of RM8,233.6mn. The stronger earnings performance was primarily driven by the construction division. The core PBT of the construction division jumped 58.8% to RM618.6mn from RM389.5mn, thanks to higher contributions from overseas jobs, especially in Australia. Meanwhile, the overseas construction revenue jumped fourfold to RM3.5bn from RM714.0mn a year ago due to the significant pick up in the work progress of the Australia and Taiwan projects.

• QoQ, 4QFY23 core profit grew 18.0% to RM251.7mn while revenue was 69.2% higher at RM3,416.8mn. The better earnings performance was mainly driven by stronger earnings contributions from overseas businesses.

Briefing highlights

Construction

• As of the end-July 2023, GAMUDA’s outstanding construction order book stood at a record high of RM20.6bn. This strong outstanding order book can provide earning visibility up to FY27.

• Management is confident that the group will achieve another record high revenue for FY24. The group is still actively looking for large infrastructure projects and it is eying to secure up to 6 large projects within the next 3-15 months.

• Pertaining to the Sydney Metro West-Western Tunnelling Package (SMW-WTP), the progression remains intact. As of the end-July 2023, the project had reached 37.0% completion. The local authority is currently reviewing the Sydney Metro West project. Management believes that the ongoing review is unlikely to impact SMW-WTP, as it will be highly costly to suspend or delay at the current stage.

• For the MRT3 project, the tender validity has been further extended to December 2023. Meanwhile, management revealed that the discussion on implementing the Penang LRT project is at an advanced stage and is expected to roll out in the next 3-4 months.

Property Development

• The property division registered another record high sales of RM4.1bn in FY23, a 2.5% jump YoY versus RM4.0bn achieved in FY22. Sales were driven mainly by both local and overseas markets.

• Unbilled property sales improved from RM5.7bn a quarter ago to another new record of RM6.7bn.

Impact

• Given the better-than-expected results, adjustments are made to reflect higher revenue recognition assumptions for certain ongoing projects as well as higher property sales for FY24 and FY25. All in, our earnings forecasts for FY24 and FY25 are increased by 22.4% and 15.6%, respectively

• Meanwhile, we introduce FY26 numbers with a projected net profit of RM1,059.0mn, representing an earnings growth of 8.5%.

Outlook

• Generally, the group is expected to deliver another decent quarter ahead, underpinned by its record high outstanding order book and properties unbilled sales.

Valuation

• After the earnings revision, we tweaked the target price higher from RM5.03 to RM5.19, based on SOP valuation. Maintain Buy on GAMUDA.

Source: TA Research - 29 Sept 2023