KUALA LUMPUR (Jan 10): Shares of Gamuda Bhd (KL:GAMUDA) could potentially climb as much as 62% from the last price if its market value catches up with the size of its order book, CGS International said on Friday.
That means Gamuda should be valued at RM8.10 compared with its last price of RM4.99, the research house said. Gamuda’s market capitalisation is currently 0.7 times its order book versus an average of 1.1 times since 2010, it noted.
“We view its order book target as conservative given the pipeline of potential data centre projects with its bundled strategy,” CGS International said. “Given its strong project win momentum, we think the stock can trade up to RM8.10.”
For now, the house raised its target price to RM6.45, based on the sum of its individual businesses’ valuations, while reiterating its ‘add’ call on the stock.
Shares of Gamuda retreated for the third consecutive day after hitting a new record high. The stock has more than doubled in 2024, tracking the strong rally of construction, as investors scrambled for exposure to companies building data centres and other lucrative industrial buildings. At its last price, the company has a market capitalisation of RM28 billion.
Gamuda is widely-liked by analysts with 19 ‘buy’, two ‘hold’ and no ‘sell’ calls. The consensus’ average target price is RM5.47, according to Bloomberg, implying potential gain of about 10% in the next 12 months.
The company’s own order book target of RM40 billion-to-RM45 billion for 2025 appears “conservative,” CGS International said. The company’s current order book stood at RM31.8 billion.
“We think the incremental order book upside, which investors are also not fully pricing in, will come from high-margin [data centre] wins on land it recently acquired in Negeri Sembilan,” the house flagged.
The 389-acre piece of land in Negeri Sembilan alone could yield contracts worth about RM19 billion over “a few years” for a campus of eight to nine data centres, CGS International said.