KUALA LUMPUR (Jan 14): Gamuda Bhd (KL:GAMUDA) is in the running to secure the remaining two packages of the Penang Light Rail Transit project, analysts said, after its consortium secured the main contract as expected.
The total cost of the project called the Mutiara Line may exceed RM13 billion, with the second segment involving as much as RM7 billion due to the complexity of the above-sea rail bridge, according to TA Securities’ estimates. The third segment could be valued at RM4 billion, the research house noted.
“Gamuda is well-positioned to secure the remaining two segments, supported by its strong technical expertise in railway construction and system provision, as demonstrated in its Australian railway projects,” it said.
A number of research houses, including MIDF Amanah Investment Bank and Hong Leong Investment Bank, also flagged the potential for Gamuda to secure the subsequent works under the project.
The first civil works package worth over RM8 billion for the project announced on Monday involves the construction of 19 stations and other facilities, stretching 24km from Komtar in George Town to Island A of the Penang South Reclamation project.
The contract was awarded to SRS Consortium Sdn Bhd, a joint venture in which Gamuda owns a 60% stake, while Loh Phoy Yen Holdings Sdn Bhd and Ideal Property Development Sdn Bhd each own 20%.
The latest contract win is expected to yield an 8% profit before tax margin, contributing an estimated RM400 million in profit before tax over the construction period, according to Philip Capital.
This brings Gamuda's year-to-date contract wins total to RM13.8 billion, boosting its order book to RM37 billion. Gamuda is on track to reach the RM40 billion to RM45 billion target by the end of 2025, the research house noted.
Other near-term prospects for Gamuda include water infrastructure works in Sabah, data centre projects, East Malaysian road projects, and renewable energy initiatives in Australia, CIMB Securities said.
Mid- to long-term opportunities include RM8.1 billion in works from New Taipei City, the RM4 billion Sg Perak raw water transfer scheme, and the potential revival of the Penang Island Link 1 under the 12th Malaysia Plan, the research house added.
Gamuda is widely liked by analysts, with 19 ‘buy’, two ‘hold’ and no ‘sell’ calls. The consensus average target price is RM5.48, according to Bloomberg, implying a potential gain of about 14% over the next 12 months.
Shares in Gamuda surged to an intraday high of RM5.07 after the opening bell on Tuesday but closed seven sen, or 1.5%, lower at RM4.72, giving the company a market capitalisation of RM26.87 billion.
The counter is now trading at a trailing 12-month price-earnings ratio of nearly 30 times, according to AskEdge.