KUALA LUMPUR (Oct 23): Analysts have raised their earnings forecasts and target prices (TPs) after Gamuda Bhd (KL:GAMUDA) grew its order book to RM28.7 billion after securing a NT$32 billion (RM4.3 billion) contract for the Xizhi Donghu Mass Rapid Transit (MRT) project in Taiwan.

The contract encompasses the construction of a 5.78km railway track featuring six elevated stations between Taipei's Neihu District and New Taipei City's Xizhi District.

TA Securities on Wednesday noted that Gamuda's order book now stands at 2.7 times its financial year 2024 (FY2024) construction revenue, with the company securing RM13.2 billion in new job wins since FY2024.

The research house raised its FY2025-FY2027 earnings forecasts by 4%-6.2% and maintained a "buy" call, with an increased TP of RM10.98 (from RM10.37).

The contract, won through a joint venture with MiTAC Information Technology Corp and Dong Pi Co Ltd, adds RM3.2 billion to the construction giant’s order book and positions the company for further upside.

This win came a year after clinching the Kaohsiung MRT Yellow Line (Taiwan) valued at RM3.45 billion in October 2023.

Hong Leong Investment Bank (HLIB) also reacted positively to the contract win, calling it a "positive surprise" that was not factored into Gamuda's earlier guidance.

HLIB raised its TP for the stock to RM9.38 (from RM9.08), noting that the contract lifts Gamuda's order book by 13%. The research house reiterated its “buy” call, citing potential for further upside from Taiwan and domestic projects such as the Penang LRT and Sabah hydro projects.

“We anticipate imminent conversion of its high certainty domestic pipeline comprising Penang LRT (RM5 billion), Sabah hydro (RM2-3 billion), Sabah water scheme (RM3-4 billion) and data centres (RM3 billion),” HLIB said.

HLIB said the partial conversion of these projects will enable Gamuda to reach the upper range of its end-calendar year 2024 order book target of RM30-35 billion as these domestic projects are key to boosting Gamuda's construction margins in the future.

“Post surprise win, we lift FY2026 core Patami (profit after tax and minority interests) 3.5%,” the research house added.

Maybank Investment believes the win is a positive surprise and comes with RM8.1 billion of additional works in about three years’ time, sustaining the project’s work momentum for at least the next 10 years.

The research house maintained its “buy” call on the stock, with a raised TP of RM9.60 (from RM8.70).

“Assuming 8% PBT (profit before tax) margin, we estimate RM195 million net profit (seven sen earnings per share) contribution over the next seven years into FY2032E,” Maybank noted.

Meanwhile, BIMB Securities echoed similar sentiments, as it maintained its “buy” call with a revised TP of RM9.82 (from RM9.50).

The research house noted Gamuda’s strong presence in the overseas market, with 75.6% of its order book now coming from international projects, particularly Taiwan.

“We raised the P/E (price-earnings) valuation for Gamuda’s construction segment to 24 times from 22 times, justified by order book expansion through its successful venture in foreign market,” BIMB said.

Currently, among the 10 analysts covering Gamuda's, at least eight have maintained a "buy" rating on the stock.

At time of writing, Gamuda’s share price rose 19 sen or 2.22% to RM8.73, valuing the company at RM24.62 billion.

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