Analysts on Gamuda’s AUD1.6 Billion Perth Rail Project As Order Book Soars

In this news analysis of Gamuda Berhad‘s new contract win and market performance, we bring you this report from MIDF.

Key Investment Highlights:

Joint Venture Success in Australia: Gamuda Berhad’s wholly owned subsidiary, DT Infrastructure (DTI), and ALSTOM have secured a significant AUD1.6 billion (RM5 billion) rail signalling project in Perth. Gamuda/DTI’s share is AUD737 million (RM2.3 billion).

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Order Book Strength: Gamuda’s current order book stands at RM26.5 billion, with expectations to exceed RM30 billion by the end of 2024.

Maintained BUY Rating: The target price (TP) is set at RM7.50, currently under review, despite the current share price being RM8.28.

Detailed Gamuda Project Analysis

• Project Scope: The JV will handle the design, supply, testing, commissioning, and maintenance of a high-capacity signalling system for Perth’s suburban rail networks. The contract includes upgrading existing systems to an integrated communications-based train control system, expected to span over ten years starting from the second half of 2024.
• Financial Impact: The project is expected to yield a pretax profit margin of 5%, translating to RM115 million over the project’s duration.

Order Book and Earnings Projections

• Order Book Growth: The new contract boosts Gamuda’s order book to RM26.5 billion, with further replenishments anticipated from projects such as the Penang LRT and Ulu Padas Hydroelectric Dam.
• Earnings Stability: Current earnings estimates remain unchanged as the project win aligns with expectations. Projected revenues and profits for FY2024 to FY2026 show consistent growth.

Market Performance

• Stock Price Movement: Gamuda’s share price has risen significantly, showing an absolute increase of 28.1% over the past month and 87.4% over the past year.
• Foreign Investment: The stock has attracted substantial foreign investment, with foreign institutional investors net buying RM331.4 million worth of shares since July 1st.

Investment Recommendation:

• Despite the share price exceeding the target price by 10.4%, the recommendation to BUY is maintained, pending a review of the target price. Gamuda’s robust project pipeline and successful international ventures support its position as a leading player in the construction sector.

Gamuda Berhad’s strategic expansion in Australia and strong order book position the company well for future growth. The maintained BUY recommendation reflects confidence in its ongoing projects and market positioning, although the target price is under review due to recent share price movements.