• Gamuda secured a RM451m contract from BCEI for core structural works on a data centre in Cyberjaya

• This contract brings the orderbook to c.RM31.4bn, keeping it well on track to achieve the higher end of its RM30–35bn orderbook target by year end

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

Secured RM451m data centre contract

Gamuda has announced the award of a RM451m data centre (DC) construction contract from BCEI Malaysia Sdn Bhd (BCEI) located in Cyberjaya. BCEI is an industry-leading engineering firm specializing in the planning, design and construction of IT facilities for numerous Fortune 500 companies. while also developing DCs for lease. The project work scope includes foundation, civil, structural, and architectural works, but MEP portions to be undertaken by BCEI. The construction is set to commence in 4QCY24, and is slated for completion by 1QCY26.

Utilising its IBS capabilities for better margins

Inclusive of this contract, YTD new wins reached c.RM6.6bn, bringing the orderbook to c.RM31.4bn. Gamuda’s solid track record of securing contracts over the past months put it well on track to meet the higher end of its RM30–35bn orderbook target by end CY24. We estimate this latest contract to fetch a higher-than-industry pretax (PBT) margin of 12%, thanks to Gamuda’s advanced IBS capabilities. These capabilities offer a distinct advantage, allowing the concurrent execution of multiple DC projects. We expect this project to contribute c.RM54m PBT over FY25–26E. DC-related jobs now make up 8% of its total orderbook, with the potential to grow further as Gamuda has recommissioned its second IBS plant, boosting its capacity to take on more DC projects.

Reiterate BUY with SOP-derived TP of RM9.20

We maintain our earnings forecast, having factored in RM18bn in contract wins for FY25. We reiterate our BUY rating and SOP-derived target price unchanged at RM9.20. We continue to like Gamuda for its strong execution track record in infrastructure projects and its pursuit of opportunities in DC related jobs. Key risks to our BUY call include delays in work progress affecting orderbook recognition, slower contract awards, weaker-than-expected property sales and project cost overrun.

Source: Philip Capital Research - 6 Nov 2024