Gamuda Receives "Buy" Rating from MIDF Research with Target Price of RM9.64

– Profit Forecast: The Taiwan MRT Project is expected to be completed over seven years, with a projected PBT (Profit Before Tax) margin of 8%. This translates to a pre-tax profit of approximately RM258.4 million for Gamuda.

– Order Book: As of the latest update, Gamuda’s order book stands at RM28.7 billion, bringing the group a step closer towards its end-2024 outstanding order book target of RM30 billion to RM35 billion. Management expects the order book to grow to RM40 billion-RM45 billion by 2025.

– Taiwan MRT Project: Gamuda has secured a significant contract worth RM4.31 billion (NTD31.96 billion) for the Xizhi Donghu Mass Rapid Transit (MRT) project in Taiwan. Gamuda’s share of this contract is RM3.23 billion. The project involves constructing a 5.78km elevated viaduct, six elevated stations (SB10 to SB15), and various system works, including rolling stock, power supply, signalling, platform screen doors, communication systems, central monitoring systems, automatic fare collection systems, and depot maintenance equipment.

– Additional Works: The joint venture (JV) led by Gamuda is also obligated to undertake additional works valued at RM10.78 billion (NTD80 billion) if instructed by the New Taipei City Government. Gamuda's share of these additional works is RM8.09 billion. Management expects the additional work to be awarded within three years.

– Maintain BUY: Gamuda's recent win of the MRT project in Taiwan is significant, bringing the company closer to its order book target of RM30 billion to RM35 billion and ensuring a steady flow of future projects. This positions Gamuda as a leading player in the construction sector, particularly for its overseas ventures and involvement in major projects.

– Revised Target Price: The target price for Gamuda has been revised upwards from RM9.01 to RM9.64, reflecting improved financial performance and future growth prospects.

– Risks:

◦ Project Delays: Delays in project completion can impact profitability and cash flow.

◦ Cost Overruns: Unexpected increases in material and labor costs could erode margins.

◦ Regulatory Changes: Changes in government policies or regulations in operating countries could affect project timelines and costs.

– Opportunities:

◦ Additional Works: The joint venture led by Gamuda is obligated to undertake additional works valued at RM10.78 billion (Gamuda’s share: RM8.09 billion) when instructed by the New Taipei City Government. This provides a significant opportunity for further revenue and profit.

◦ International Expansion: Successful execution of the Taiwan MRT project can open doors for more international opportunities, enhancing Gamuda’s global footprint.

◦ Diversification: Diversifying into new markets and sectors can reduce dependency on a single region or industry, thereby mitigating risks.

Gamuda Berhad’s recent win in Taiwan underscores its capability to secure and deliver large-scale international projects. The company’s strong order book and robust financial performance support the BUY recommendation with a revised target price of RM9.64. While there are risks associated with project delays and cost overruns, the potential for additional works and further international expansion presents significant opportunities for growth. Investors are advised to consider these factors when making investment decisions.