KUALA LUMPUR (Sept 29): Gamuda Bhd rose by as much as 25 sen or 5.8% to RM4.56 after the construction giant released its quarterly results on Wednesday (Sept 27), which showed a net profit increase of 128.03% to RM1.84 billion in the financial year 2023 (FY2023) from RM806.23 million a year earlier, largely fuelled by gains from the divestment of its highways.
At the lunch break, the stock trimmed some gains to trade at RM4.47, up by 16 sen or 3.71%, with 6.33 million shares changing hands, valuing the group at RM12.05 billion. The counter had earlier risen to a high of RM4.56.
The stock was among the top gainers on Bursa Malaysia.
On Wednesday, Gamuda reported that its net profit rose to RM1.84 billion or 69.93 sen per share for the full year FY2023, up from RM806.23 million or 31.86 sen per share for FY2022.
The construction group’s net profit in the fourth quarter ended July 31, 2023 (4QFY2023), however, declined marginally by 1.37% to RM251.75 million from RM255.24 million a year ago, while revenue climbed 84.23% to RM3.42 billion from RM1.86 billion registered in the previous year’s corresponding quarter.
On a quarterly basis, the group's net profit was 12.71% higher compared to the RM223.37 million reported in the immediate preceding quarter (3QFY2023), and revenue jumped by 65.3% from RM223.37 million due to stronger earnings contributions from the overseas businesses of its construction and property divisions.
Analysts have turned bullish on Gamuda as the construction group is expected to secure up to six mega projects over the next three to 15 months, comprising Mass Rapid Transit 3 (MRT3) tunnelling, Suburban Rail Loop East's second package, an infrastructure project in Taiwan, the Pan Borneo Sabah highway, Penang light rail transit (LRT), and a local renewable energy project.
CGS-CIMB Securities raised its target price (TP) for Gamuda to RM5.65 from RM5.58 previously and revised up its earnings per share forecasts by 14.6% for FY2024, by 20.2% for FY2025, and by 18.7% for FY2026, to account for the anticipated increase in new order wins and property sales.
"In our view, FY2024 new order wins of RM12 billion are fair, given the group's strong new order wins of RM12 billion in FY2022 and RM10 billion in FY2023, along with its confidence in securing RM25 billion worth of new orders in FY2024 to FY2025," CGS-CIMB said in a note on Friday.
CGS-CIMB also added that there are several potential catalysts that could drive a re-rating of the stock, including the possibility of quicker-than-expected awards for key local projects like MRT3 and Penang LRT, increased success in Australian infrastructure ventures, and improved property sales performance.
Meanwhile, RHB Research maintained its "buy" rating on the stock, and slightly raised its TP to RM5.31 from RM5.27 previously.
"We raise our job replenishment target in FY2024 to FY2025, from RM23 billion to RM25 billion due to the group's geographical outreach. We also introduce our FY2026 earnings forecast with a job replenishment assumption of RM10 billion while adjusting the latest net debt input in our SOP (sum-of-parts) valuation post-results release," it added.
Similarly, Public Investment Bank Research raised its earnings forecast for Gamuda by an average of 20% for FY2024 to FY2026, due to higher billings and better margins assumed. The research house also maintained its "outperform" rating, though with a lower SOP-based TP of RM5.00, from RM5.10 previously, citing "share base dilution effect".
On the other hand, Hong Leong Investment Bank maintained its "buy" rating and marginally raised the TP to RM4.93 from RM4.92, based on a 10% discount to an SOP value of RM5.48.
Kenanga Research maintained its earnings forecast for Gamuda and highlighted the company's impressive FY2023 revenue surge of 68%, attributed to significant progress in projects in Australia and Taiwan.
Looking forward, Kenanga Research is optimistic about Gamuda for several compelling reasons, including the group being a frontrunner for the Penang LRT project and holding a strong position for the tunnelling job for MRT3. The group's track record of successful project wins in Australia and Singapore underscores its competitiveness in the global market.
Furthermore, Gamuda boasts a robust earnings outlook supported by a substantial outstanding order book of RM20.6 billion. Additionally, the company is actively pursuing growth opportunities in the renewable energy sector, further enhancing its prospects, Kenanga Research noted. In light of these factors, Kenanga Research maintained its "outperform" rating on Gamuda and a TP of RM5.45.