What Investors Need to Know Before Gamuda's Upcoming Earnings Report?

The company is set to announce its fourth-quarter financial results for the fiscal year ending July 31, 2024, on September 26. As reported by Bloomberg, the 12-month target price stands at RM8.42, indicating a potential increase of 4.3%.

Amidst the booming data center construction projects in Malaysia, Gamuda holds the right to select its projects. The company stated that "it is experiencing a significant increase in data center inquiries," and will prioritize projects that offer better margins.

Previously, the AIMS data center project, valued at RM300 million, was completed in just eight months, significantly ahead of the expected thirteen months. More recently, Gamuda won a bid for a massive data center project valued at RM170 million located in Elmina Business Park (Klang Valley Industrial and Business Park), with an anticipated completion in 2026.

With Malaysia representing 31% of its total construction order book, further successes in local projects are predicted to significantly boost earnings contributions. As of Q3 FY2024, the order book stood at RM24.2 billion, and management is confident of surpassing RM30 billion by December 2024.

In the first nine months of fiscal year 2024, property sales reached RM2.30 billion. Despite this, management is steadfast in their goal to hit RM5.0 billion in sales for the full year, projecting approximately RM2.70 billion in sales for the fourth quarter alone. According to JP Morgan, there is an expected surge in property sales during this period. They highlighted top-selling domestic projects, which include Gamuda Cove, Gamuda Gardens, Horizon Hills, and twentyfive7.

The proportion of overseas construction operations has rapidly increased, representing 86% in the first three quarters of FY2024, up from 55% in the same period last year. Previously, lower profit margins in this sector had weighed down the company's overall profitability. However, the profit margin for overseas construction business has improved from 3.3% to 3.5% in Q3.

Management maintains a positive outlook on future profit margins for several reasons. On the one hand, jobs are progressing beyond the initial mobilization phase, on the other hand，there is significant operating leverage, as revenue is increasing at a faster rate than fixed overhead costs.

Following a comprehensive review of its business plans and targets before the fiscal year-end in July, management has set an ambitious target, projecting a Compound Annual Growth Rate (CAGR) of +20% in revenue from FY2024 to FY2028. By FY2028, the company anticipates reaching a topline of RM30.0 billion, effectively doubling its expected revenue in FY2024. The construction sector is slated to contribute two-thirds of this growth, while the property sector will account for one-third.

According to MIDF Research, Gamuda's construction division is set to experience significant expansion, driven by a strong pipeline of infrastructure projects in Malaysia and further boosted by international ventures, especially in Australia. Concurrently, the property development sector is anticipated to see considerable growth internationally, with approximately 60% of its projects situated in Vietnam, the UK, and Australia.