KUALA LUMPUR (July 17): Gamuda Bhd (KL:GAMUDA) could surpass its order book target following the Perak water supply deal, which offers potential recurring income, analysts said.

According to CGS International, if the Perak deal is awarded this year with formalisation likely by late 2025 or early 2026, Gamuda’s year-to-date contract wins would rise to RM23.4 billion. This could lift its year-end order book to an estimated RM47 billion, surpassing its target range of RM40 billion to RM45 billion by end-2025.

“Gamuda will have two bites of the cherry for this project which is potential recurring income and potential order book of RM5 billion once the construction work is awarded,” said the research house, which maintains a “buy” call on the stock with a target price of RM6.

On Tuesday, the Perak state government appointed a joint venture between the construction company and Perbadanan Kemajuan Negeri Perak (PKNPk) to develop and operate water treatment and distribution infrastructure with an estimated total development value of RM5 billion.

Gamuda estimates the project’s pretax margin at approximately 10% to 12%, consistent with its margins for other Malaysian infrastructure projects. CGS International anticipates this will support a more meaningful margin recovery in the financial year ended July 31, 2026 (FY26).

“This is when its local projects [39% of order book as at June 25] move away from the shallow part of the S-curve recognition,” the house said. The shallow portion of the S-curve typically reflects the early phase of a project, where progress and revenue recognition are slower.

CGS International views the award as a signal that the government may be aiming to accelerate project rollouts. Key events to watch include the tabling of the 13th Malaysian Plan at the end of July 2025 and the national budget in October.

Looking ahead to 2026, the research house said Gamuda’s project pipeline remains promising. The group is involved in three early contractor involvement (ECI) renewable energy projects in Australia, which may be converted into full engineering, procurement, construction, and commissioning (EPCC) contracts.

In addition, Gamuda has been shortlisted for several tenders, including the Parramatta Integrated Stations project in New South Wales, Australia; the Northland Corridor highway project in New Zealand which is a potential new market for the group and the Sunshine Coast Railway project in Brisbane, Australia.

“We view this development positively as Gamuda stands to benefit from two income streams, construction revenue and recurring income upon the project’s commercialisation,” said Public Investment Bank which maintains a “buy” rating on the stock with an unchanged target price of RM5.60.

According to Bloomberg data, 20 research houses currently cover Gamuda, with 19 recommending “buy” and one issuing a “hold”. The average target price stands at RM5.64, implying a potential upside of 10.8% from its last traded price.

At the time of writing on Thursday, shares of Gamuda rose six sen or 1.2% to RM5.09, giving the group a market capitalisation of RM29.4 billion. The stock has gained over 8% year-to-date.