Gamuda's joint venture (JV) consortium, SRS Consortium SB has been appointed as the main contractor to deliver the first civil works package, worth RM8.3bn, for the Penang Mutiara Light Rail Transit (LRT) project. Based on Gamuda's stake in the JV, the contract value attributable to Gamuda is RM5.0bn. With this new contract, the Group's outstanding orderbook is now estimated at RM37bn. While we view the contract win positively, we are keeping our forecast unchanged as this makes up part of order book replenishment assumption of RM16bn. We maintain our Outperform rating on Gamuda, with an unchanged SOTP-based TP of RM5.20.

• Project details. The JV consortium is 60% owned by Gamuda, with Loh Phoy Yen Holdings SB and Ideal Property Development SB each holding a 20% stake. Meanwhile, MRT Mutiara SB, a fully owned subsidiary of MRT Corp, is the project developer and asset owner of the LRT Mutiara Line. The Penang Mutiara LRT Line project is set to be built in two phases, stretching 29.5km with a total of 21 stations. It will connect key areas of Penang Island and the mainland.
• First package's scope of works. The first segment of the project has been awarded by MRT Mutiara SB to SRS Consortium SB, stretching 23.7km from Komtar in George Town to Penang South Reclamation Island A. The contract involves 19 stations and other related facilities, with project completion scheduled within six years.
• Second package. This segment covers the train line from Macallum Station in George Town to the Penang Sentral Station in Seberang Perai. A tender is tentatively set to open in July, with the award to be announced by early next year.
• Third package. This component involves an open tender for the turnkey contract of systems, encompassing the design, procurement, construction, testing, commissioning and maintenance of railway systems.
• Outstanding orderbook at RM37bn. The Group's unbilled order book has increased by 15.6% to approximately RM37bn. Assuming a mid to high single-digit margins and a corporate tax rate of 24%, this project is expected to contribute about 2.5% to net profit annually over the project's 6-year duration. However, we make no adjustments to our earnings estimates, as this constitutes part of our RM16bn order book replenishment assumption for FY25.

Source: PublicInvest Research - 14 Jan 2025