• Gamuda, through a 75% owned joint venture, secured a RM4.3bn MRT railway construction contract in Taiwan

• This contract brings the order book to c.RM29bn; well on track to achieve its RM30– 35bn internal order book target by end24

• Maintain BUY rating and SOP-derived target price of RM9.20

Clinches another MRT work package in Taiwan

Gamuda announced that its 75%-owned JV with MiTAC Information Technology and Dong Pi Co has been awarded the design and build contract of Xizhi Donghu Mass Rapid Transit construction turnkey project in Taiwan by the Department of Rapid Transit Systems. The total contract value is NT$32bn (c.RM4.3bn). The project scope includes the construction of a 5.8km railway track with six elevated stations within Taipei Neihu District and New Taipei City Xizhi District. The project is expected to be completed within seven years. The JV will also be undertaking predetermined additional works, including the construction of a depot as well as system and track works for two extension lines. These works are estimated at NT$80bn (c.RM10.8bn) and are expected to be awarded in 3 years.

On track to achieve its RM30–35bn order book target

Based on Gamuda’s 75% effective equity stake, its order book is expected to increase by RM3bn, bringing the current outstanding order book to c.RM29bn, representing 2.7x its FY25 construction revenue. This contract brings Gamuda’s FY25 YTD new wins to RM4bn, and it is on track to meet management’s internal target of RM30–35bn order book by end24. We estimate 8% profit before tax margins (PBT), which is in line with the overseas infrastructure projects margins, translating to c.RM256m PBT. Gamuda will secure an additional RM8bn contract for this railway project in FY28, based on its 75% equity stake in the JV.

Reiterate BUY with SOP-derived TP of RM9.20

We make no changes to our earnings forecast, as this contract falls under our replenishment assumption. We maintain our BUY rating and SOP-derived target price unchanged at RM9.20. Securing additional construction contracts would serve as a further re-rating catalyst. Key risks to our BUY call include slower work progress and weaker-than-expected property sales.

Source: Philip Capital Research - 23 Oct 2024