KUALA LUMPUR (Aug 1): Kenanga Investment Bank has maintained its “outperform” rating on Gamuda Bhd at RM4.30 with an unchanged target price of RM5.15, and said that the sell-down on Gamuda shares on Monday (July 31) — triggered by news on the potential cancellation of the Metro West project in Australia — is a good buying opportunity.
Kenanga said it is highly unlikely that Gamuda’s tunnelling package will be affected, as it is almost halfway through at 40%.
“It is also unlikely to cut the cost of the tunnelling packages and it is costly to scrap the project at this stage.
“At worst, should the package be terminated, it would reduce Gamuda’s FY2024 net profit by 8%.
“Assuming the remaining 60% works to be circa RM3.9 billion with an operating margin of 11%, total profit contribution would be RM300 million over the next three years.
“We believe the RM429 million loss in the market cap yesterday (July 31) is unwarranted,” it said.
Kenanga said it continues to like Gamuda for: (i) it being the front-runner for the tunnelling job for the MRT3, (ii) its job wins in Australia and Singapore that speak eloquently for its competitiveness in the international market, (iii) its strong balance sheet after the disposal of its toll highways, (iv) its strong earnings visibility, underpinned by a robust outstanding order book of RM21.5 billion, and (v) its efforts to expedite growth in the renewable energy space, in line with global sustainability goals.