Gamuda Berhad (GAM MK) has maintained its BUY rating from MIDF Investment Bank (MIDF), with an increased target price of RM7.50, up from RM6.83, implying a 15.4% upside and a 2.1% FY24F yield. Gamuda recorded a core net profit of RM235.8 million in 3QCY24, reflecting 5.6% year-on-year growth, with cumulative 9MFY24 revenue growing 79.1% year-on-year to RM8.63 billion and core earnings up 5.1% year-on-year to RM639.6 million.
Construction revenue surged 88.5% year-on-year to RM7.18 billion in 9MFY24, driven by overseas projects contributing 86.4% of this growth. Despite a modest net profit growth of 3.3% year-on-year to RM364.0 million, management is optimistic about margin improvements from a stronger mix of upcoming local projects and gradually improving overseas margins.
Management is confident of surpassing the RM30.0 billion mark for its order book by December 2024, with the current order book standing at RM24.2 billion. They anticipate securing at least RM10.0 billion of new projects in 2HCY24, including significant contributions from the Penang LRT, Ulu Padas Hydroelectric Dam, and Pan Borneo Sabah, alongside overseas prospects like the Suburban Rail Loop in Victoria.
Gamuda is positioned favourably in the data centre construction sector, having completed AIMS Cyberjaya Block 2 ahead of schedule. The group expects strong opportunities in the hyperscale data centre space, enhancing its profile as a premium builder.
The property division saw a 46.9% year-on-year revenue jump to RM2.83 billion in 9MFY24, with net profit growing 30.8% year-on-year to RM275.6 million. Management remains confident in achieving the RM5.0 billion sales target for FY24, with significant contributions expected from projects in Vietnam, the UK, and Australia.
Management has projected a +20% CAGR in revenue from FY24 to FY28, aiming for a RM30.0 billion topline by FY28. This growth will be driven by the construction business, particularly overseas, and strong contributions from property development in Vietnam, the UK, and Australia.
Gamuda declared a second interim dividend of 10 sen, raising its FY24 DPS to 16 sen (a dividend yield of 2.5%). Management suggested that future DPS could increase to 20 sen if the earnings trajectory aligns with projections.
MIDF has slightly adjusted FY24 earnings estimates down by -7.1 % to RM1.01 billion due to lower expected margins but raised FY25F and FY26F estimates by +9.9% and +13.6% to RM1.30 billion and RM1.43 billion, respectively. The upgraded target price of RM7.50 is based on a PER of 16x FY25F EPS of 46.9 sen.
Investors are encouraged to consider Gamuda shares due to their robust overseas expansion, consistent project wins, and favourable position in mega projects and data centre construction. The strong order book provides solid earnings visibility, making Gamuda an attractive investment with the potential for significant future growth.
