• BUY (TP: RM9.50). Gamuda Berhad (Gamuda) reported a FY24 core net profit of RM912.1mn, which broadly aligned with ours and consensus expectations, accounting for 108.5% and 96.8% respectively. The company delivered a 62.4% YoY revenue growth, predominantly fuelled by the strong contribution from its overseas construction activities, especially in Australia. Despite a significant increase in top-line revenue, net profit growth was a modest 12.0%, primarily due to margin pressures from lowermargin activities in the local construction sector and foreign exchange losses, which are estimated to have reduced the FY24 net profit by RM30- 40mn. Domestic construction revenue share contribution experienced a 39% YoY decline, largely reflecting the completion of MRT2 and delays in the rollout of key infrastructure projects namely the Penang LRT and Upper Padas Hydroelectric Project. Nevertheless, Gamuda's outlook remains buoyant, bolstered by a pipeline of substantial, higher-margin local projects poised to drive growth in the coming year.

• Key highlights. Driven by a surge in Australian projects, the construction division experienced a robust 71% YoY revenue growth. Nonetheless, margin was compressed from 8.1% to 4.7% as lower-margin international contracts gained a larger share. Similarly, in the property segment, margins fell to 9.8% from 11.1%, primarily following the completion of the highmargin Celadon City project. Despite this, ongoing local township projects are positioned to support margin recovery moving forward. On the execution front, the Rasau Water Treatment Plant experienced a minor setback due to an embankment collapse, but this is not expected to cause significant delays as it occurred at an ancillary intake site. Meanwhile, Silicon Island's reclamation project is progressing steadily with 35 acres reclaimed thus far, with expectations of accelerated progress by the end of 2024. Gamuda also announced a 33% increase in its dividend payout to 16sen per share for FY24, up from 12sen, reflecting its robust cash flow.

• Earnings Revision. Unchanged.

• Outlook. We anticipate Gamuda’s FY25 performance will be propelled by a recovery in profit margin, particularly within its construction division, as key higher-margin local projects such as the Penang LRT and Upper Padas Hydroelectric Project begin to contribute more significantly. This, coupled with sustained international growth, is expected to drive robust earnings. Gamuda’s orderbook is projected to expand to RM30bn by the end of CY24, bolstered by RM15bn in replenishments in 1HFY25, with approximately 20% (c.RM3.0bn) coming from data centre focusing in central region. Additionally, tenderbook from highway projects in Pan Borneo Sabah and Northern Coastal Sarawak, alongside renewable energy projects in Australia, could further support this growth trajectory. In the property segment, the company remains poised for strong momentum, aiming to double sales by FY28. For FY25, property sales are expected to reach RM6.0bn, supported by strong demand for quick-turnaround projects (QTPs), particularly in Vietnam, which continues to be a major growth driver.

Source: BIMB Securities Research - 27 Sept 2024