KUALA LUMPUR (Sept 27): The rally in Gamuda Bhd's (KL:GAMUDA) shares may still have more legs from robust earnings, analysts said, even as the construction company’s latest quarter came in slightly below expectations.
Shares of Gamuda have already risen nearly 79% so far this year, and a large majority of research houses covering the stock still kept their ‘buy’ calls on the stock. The consensus 12-month target prices have also been lifted to an average of RM8.75 from RM8.42 a week ago.
“We maintain a positive outlook on the group's ability to secure more large-scale projects supported by its strong track record and market position as a leading contender for high-complexity jobs,” said TA Securities, which now has the highest target price covering Gamuda at RM10.37.
Further, the robust outstanding order book and substantial unbilled property sales point to significant contribution to revenue and profit growth in the upcoming financial year, the research house noted.
The company said its order book could potentially hit as much as RM35 billion by December 2024 and RM45 billion by the end of 2025, according to analysts who attended the company’s earnings briefing. Unbilled jobs at hand stood at RM24.8 billion at the end of July.
Core net profit for the year ended July 31, 2024 (FY2024) came in at only 95% of consensus forecast though it was a new all-time high for Gamuda. The consensus expects FY2025 to be another record year for the company, raking in a net profit of about RM1.20 billion.
Post-earnings, Gamuda has 14 ‘buy’ ratings and only one ‘hold’ call.
Foreign exchange impact was partly to be blamed for the weaker-than-expected earnings as the ringgit strengthened against the Vietnamese dong and Australian dollar, shaving off about RM35 million from its profit, said MIDF Amanah Investment Bank.
“We believe that the compressed margins have reached an inflection point” and investors should expect an improvement in margins, especially from construction, when more local projects come into the mix, the research house said.
Apart from construction, Gamuda is also involved in property development, which contributed about 43% to its pre-tax profit for FY2024. Property sales totalled RM5 billion in FY2024 with unbilled sales of RM7.7 billion. Gamuda is targeting property sales of RM6 billion for FY2025.
New “quick turnaround projects” projects in Vietnam with a total gross development value of RM2 billion may propel the segment’s growth in addition to the unbilled sales, said RHB Investment Bank.
On Thursday, Gamuda reported an 8.2% year-on-year increase in net profit to RM272.49 million while revenue rose 38.7% to RM4.72 billion for the fourth quarter ended July 31, 2024 (4QFY2024).
For FY2024, its net earnings from continuing operations rose 12% to a record-breaking RM912.13 million while revenue jumped 62.4% to RM13.35 billion.