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

Gamuda is a leading company in Malaysia's engineering, property development, and infrastructure construction sectors, with business projects spanning both local and international locations. Its stock price has surged by more than 100% since the beginning of the year.

The company is expected to release its financial results for the first quarter of the fiscal year 2025, which ended on 31 October , 2024, on 6th December. Over the past month, a total of 11 institutions have given ratings, all of which are "buy" or "outperform". The highest target price is RM10.98, provided by TA Securities Holdings on November 5th.

On 22nd October, Gamuda announced that it had secured a major design and construction contract, worth RM4.3 billion, from the Taipei City Government's Mass Rapid Transit System Bureau for the delivery of the Xizhi Donghu Mass Rapid Transit (MRT) in Taiwan. In early November, Gamuda announced that it had won a construction contract worth RM450 million for a data center in Cyberjaya, which is expected to cover the basic, civil, structural, and architectural works of the data center, with completion anticipated by 2026. On 11th November, the Penang Light Rail Pearl Line project entered the final negotiation phase, with project details and construction costs expected to be finalized by the end of the year. The project is anticipated to be undertaken by the SRS consortium, in which Gamuda holds approximately 60% of the shares. Additionally, Gamuda, in collaboration with Ferrovial Construction, has the opportunity to secure a pumped hydro energy storage project in Australia, with the contract valued at no less than 1 billion Australian dollars. As these positive news announcements continue to be released, the stock prices have been gradually rising recently.

The continuous influx of new projects provides a very solid foundation for Gamuda's future revenue. The current backlog of uncompleted orders has increased to RM31.4 billion, and it is anticipated that there will be an even stronger pipeline of projects. By the end of 2024, it is expected that Gamuda's overall order volume will reach RM35 billion. The revenue and profits from each project will gradually be reflected in the financial statements from the start to the completion of the project. Reviewing previous financial data, we can understand that the pre-tax profit margin for construction projects is approximately around 7%. This implies that, assuming the profit margin remains unchanged, these project reserves will bring Gamuda a total of about RM2.45 billion in pre-tax profits over the next few years.

According to the financial performance announcement for the fiscal year 2024, Gamuda disclosed that its revenue for the entire fiscal year, including that of its joint ventures, reached RM15 billion , with overseas revenue amounting to RM9 billion, marking a significant success in its overseas expansion strategy. With more projects expanding particularly in Australia and Vietnam, Gamuda's overseas income is set to become more diversified and sustainable.

The overseas development of real estate projects has also been very successful. In the fiscal year 2024, the total overseas real estate sales reached RM2.5 billion, with Vietnam being the largest contributor at 93%. This is attributed to the significant growth and recovery of Vietnam's real estate market, underpinned by a strong economic performance, with a GDP growth of 6.4% in the first half of 2024 and a 13% increase in foreign direct investment (FDI). The volume of real estate transactions has doubled compared to 2023.

MIDF views Gamuda as an outstanding construction company, attributing its success to a well-executed international expansion strategy, its consistent ability to secure substantial contracts, and its leading position in most mega projects within Malaysia. As a premium builder of data centers, the group has now shifted its focus exclusively to hyperscale data centers, which supports significant order book replenishments. In conclusion, they maintains 'BUY' recommendation for Gamuda.