Gamuda (GAM MK)
Set To Make a Huge Splash In Perak; BUY
Malaysia Company Update
Construction & Engineering | Construction
Buy (Maintained)
Target Price (Return): MYR5.86 (17%)
Price (Market Cap): MYR5.03 (USD6,846m)
ESG score: 3.4 (out of 4)
Avg Daily Turnover (MYR/USD): 95.4m/22.4m
Analyst
Adam Bin Mohamed Rahim
+603 2302 8101
adam.mohamed.rahim@rhbgroup.com
- BUY with SOP-based MYR5.86 TP, 17% upside and c.2% FY26F (Jul) yield. On 16 July, Gamuda together with the Perak State Development Corporation (PKNPk) – in a 50:50 JV – accepted a letter of appointment from the Perak state government for the development and operation of water treatment and distribution infrastructure in Kerian (northern Perak). Recall that in February, both parties initially signed an exclusive arrangement to develop infrastructure to address critical water shortage in northern Perak.
- Further details. The aforementioned infrastructure forms part of the broader Northern Perak Water Supply Scheme (NPWSS) which has an estimated total development value of MYR5bn, a strategic initiative by the Perak and federal governments to address long-standing water shortages for irrigation, domestic, and industrial use in the region. Aside from the development and operation of water treatment and distribution infrastructure in Kerian, the JV will also undertake the supply of treated water to the Kerian Integrated Green Industrial Park (KIGIP) and the sale of excess treated water to Penang. These will be executed by the JV on a privatisation basis with a minimum 40-year operation period.
- GAM to have two bites of the cherry. GAM via the JV would be able to recognise 50% of the recurring income from NPWSS at the developer level. Additionally, the JV – which is the project owner of NPWSS – may appoint GAM as the turnkey contractor. This is not something new to GAM as the Ulu Padas Hydroelectric Project in Sabah includes the company as a developer (effective 45% stake in a JV with Sabah Energy Corporation and Kerjaya Kagum Hitech JV) and as the total development contractor.
- Orderbook impact. The latest announcement does not constitute any additional orderbook to GAM’s current c.MYR37bn balance orderbook pending approvals prior to a formal award for the NPWSS project. We conservatively envisage any formal awards pertaining to the NPWSS project to likely take place in CY26. Profitability wise, we estimate the margin of the NPWSS project to be in the range between 10% and 12%.
- No changes to our earnings estimates as there were no changes in orderbook while awaiting further details, ie tariffs, project tenure, and approval from the relevant authorities related to the NPWSS project. Hence, we make no changes to our SOP-derived TP of MYR5.86, which bakes in an 8% ESG premium.
- While GAM is trading at 20.7x FY26F P/E – a premium to the Bursa Malaysia Construction Index (average 10-year mean P/E of 14x) – we view that there is room for valuations to be higher, backed not just for its data centre (DC) capabilities but also for its involvement in railway and renewable energy projects in Australia. Key risk: Slower-than-expected job replenishment.
Share Performance (%)
| YTD | 1m | 3m | 6m | 12m | |
|---|---|---|---|---|---|
| Absolute | 6.1 | 4.8 | 29.3 | 18.1 | 26.5 |
| Relative | 13.2 | 4.4 | 26.0 | 20.0 | 32.7 |
| 52-wk Price low/high (MYR) | 3.48 – 5.20 | ||||
Forecasts and Valuation
| Jul-23 | Jul-24 | Jul-25F | Jul-26F | Jul-27F | |
|---|---|---|---|---|---|
| Total turnover (MYRm) | 8,268 | 13,347 | 15,099 | 17,723 | 20,482 |
| Recurring net profit (MYRm) | 860 | 912 | 976 | 1,405 | 1,579 |
| Recurring net profit growth (%) | 6.7 | 6.0 | 7.0 | 43.9 | 12.4 |
| Recurring P/E (x) | 33.26 | 31.37 | 29.73 | 20.66 | 18.38 |
| P/B (x) | 2.7 | 2.5 | 2.5 | 2.3 | 2.1 |
| P/CF (x) | 70.63 | 188.34 | na | 48.16 | 27.79 |
| Dividend Yield (%) | 5.0 | 1.6 | 2.0 | 2.0 | 2.0 |
| EV/EBITDA (x) | 29.79 | 28.34 | 21.91 | 16.38 | 14.95 |
| Return on average equity (%) | 7.9 | 8.2 | 8.4 | 11.5 | 12.1 |
Overall ESG Score: 3.4 (out of 4)
Please refer to the ESG analysis on the next page
Emissions And ESG
Trend analysis
In FY24, total emissions increased to 466,529 tonnes of CO2e (FY23: 158,150 tonnes of CO2e), which was in tandem with more ongoing jobs on hand.
| Emissions (tCO2e) | Jul-22 | Jul-23 | Jul-24 | Jul-25 |
|---|---|---|---|---|
| Scope 1 | 8,428 | 7,245 | 31,224 | na |
| Scope 2 | 18,147 | 20,897 | 36,699 | na |
| Scope 3 | 5,709 | 130,008 | 398,606 | na |
| Total emissions | 32,284 | 158,150 | 466,529 | na |
Source: Company data, RHB
Latest ESG-Related Developments
Expansion of its emissions traceability: In FY23, the company began collecting Scope 3 emissions data from suppliers and disclosing data from eight out of the 15 emission categories according to the Greenhouse Gas (GHG) Protocol in addition to implementing carbon traceability using cloud-based ESG software.
ESG Unbundled
Overall ESG Score: 3.4 (out of 4)
Last Updated: 27 February 2025
E Score: 3.4 (EXCELLENT)
GAM is actively conducting various simulations, projections, and baseline studies on its GHG emissions. It continues to fine-tune its measurements and monitors processes to capture more scientific information, including its Scopes 1 and 2 GHG emissions. Gamuda Park is the umbrella programme encompassing its efforts in biodiversity and nature conservation.
S Score: 3.3 (EXCELLENT)
GAM is leading the construction industry standard with the establishment of the KVMRT Safety Training Centre. It is the first Malaysia-based subcontractor to win the Lendlease Safety Award for acing the global minimum requirement.
G Score: 3.3 (EXCELLENT)
57% of GAM’s board is independent, with full disclosures on director remunerations – this includes salaries and bonuses on a named basis. The company has an in-house investor relations team and holds regular investor meetings, embodying good transparency and disclosure practices.
Financial Exhibits
Valuation basis
We value the group based on its SOP, derived from a combination of P/E, DCF, and RNAV valuation methodologies.
Key drivers
GAM’s earnings are underpinned by construction orders and property sales.
Key risks
Slower-than-expected orderbook replenishment.
Company Profile
GAM is an investment holding and civil engineering construction company. Through its subsidiaries, it provides earthwork construction, manufactures and supplies road surfacing materials, and operates a quarry and road-laying projects.
Financial summary (MYR)
| Jul-23 | Jul-24 | Jul-25F | Jul-26F | Jul-27F | |
|---|---|---|---|---|---|
| Recurring EPS | 0.15 | 0.16 | 0.17 | 0.24 | 0.27 |
| DPS | 0.25 | 0.08 | 0.10 | 0.10 | 0.10 |
| BVPS | 1.90 | 2.00 | 2.04 | 2.18 | 2.36 |
| Return on average equity (%) | 7.9 | 8.2 | 8.4 | 11.5 | 12.1 |
Valuation metrics
| Jul-23 | Jul-24 | Jul-25F | Jul-26F | Jul-27F | |
|---|---|---|---|---|---|
| Recurring P/E (x) | 33.26 | 31.37 | 29.73 | 20.66 | 18.38 |
| P/B (x) | 2.7 | 2.5 | 2.5 | 2.3 | 2.1 |
| FCF Yield (%) | (1.4) | (3.4) | (2.2) | 1.0 | 2.6 |
| Dividend Yield (%) | 5.0 | 1.6 | 2.0 | 2.0 | 2.0 |
| EV/EBITDA (x) | 29.79 | 28.34 | 21.91 | 16.38 | 14.95 |
| EV/EBIT (x) | 33.76 | 33.21 | 25.61 | 18.48 | 16.84 |
Income statement (MYRm)
| Jul-23 | Jul-24 | Jul-25F | Jul-26F | Jul-27F | |
|---|---|---|---|---|---|
| Total turnover | 8,268 | 13,347 | 15,099 | 17,723 | 20,482 |
| Gross profit | 1,697 | 1,840 | 2,437 | 3,323 | 4,062 |
| EBITDA | 1,023 | 1,109 | 1,468 | 1,952 | 2,088 |
| Depreciation and amortisation | (120) | (163) | (212) | (223) | (235) |
| Operating profit | 903 | 946 | 1,256 | 1,730 | 1,854 |
| Net interest | (78) | (173) | (216) | (245) | (247) |
| Pre-tax profit | 1,058 | 1,098 | 1,312 | 1,836 | 2,026 |
| Taxation | (221) | (155) | (302) | (404) | (426) |
| Reported net profit | 815 | 912 | 976 | 1,405 | 1,579 |
| Recurring net profit | 860 | 912 | 976 | 1,405 | 1,579 |
Cash flow (MYRm)
| Jul-23 | Jul-24 | Jul-25F | Jul-26F | Jul-27F | |
|---|---|---|---|---|---|
| Change in working capital | (166) | (262) | (1,293) | (692) | (299) |
| Cash flow from operations | 405 | 152 | (332) | 603 | 1,044 |
| Capex | (793) | (1,132) | (300) | (300) | (299) |
| Cash flow from investing activities | (233) | (1,262) | (201) | (202) | (202) |
| Dividends paid | (1,443) | (101) | (577) | (577) | (577) |
| Cash flow from financing activities | 771 | 910 | (192) | (320) | (671) |
| Cash at beginning of period | 2,794 | 3,169 | 2,699 | 2,331 | 2,339 |
| Net change in cash | 943 | (200) | (725) | 81 | 171 |
| Ending balance cash | 3,717 | 2,970 | 1,974 | 2,413 | 2,512 |
Balance sheet (MYRm)
| Jul-23 | Jul-24 | Jul-25F | Jul-26F | Jul-27F | |
|---|---|---|---|---|---|
| Total cash and equivalents | 3,169 | 2,699 | 2,331 | 2,339 | 2,846 |
| Tangible fixed assets | 5,322 | 5,444 | 4,829 | 4,734 | 4,629 |
| Total investments | 2,021 | 2,460 | 2,732 | 3,080 | 3,500 |
| Total assets | 23,867 | 26,521 | 28,939 | 30,849 | 33,074 |
| Short-term debt | 1,410 | 1,003 | 1,103 | 1,153 | 1,203 |
| Total long-term debt | 5,514 | 6,803 | 6,903 | 7,003 | 7,103 |
| Total liabilities | 12,941 | 15,000 | 16,984 | 18,039 | 19,240 |
| Total equity | 10,927 | 11,521 | 11,954 | 12,810 | 13,833 |
| Total liabilities & equity | 23,867 | 26,521 | 28,939 | 30,849 | 33,074 |
Figure 1: Gamuda’s SOP valuation
| Construction: | FY26F PATMI (MYRm) | Target P/E (x) | Total (MYRm) |
|---|---|---|---|
| Value for overseas construction (bulk from Australia) | 594.0 | 24 | 14,256 |
| Value for Malaysia construction | 428.0 | 25 | 10,700 |
| Concessions:- | DCF (MYRm) | Stake (%) | |
| Gamuda Water (O&M concession for SSP 3) | 545 | 80 | 436 |
| Property:- | Remaining area (acres) | WACC (%) | Remaining GDV (MYRm) | Ownership (%) | NPV of profit (MYRm) |
|---|---|---|---|---|---|
| Malaysia | 1,844 | 8 | 37,894 | various | 2,959.0 |
| Overseas | 232 | 8 | 13,475 | various | 425.0 |
| QTP: | 63 | ||||
| Artisan Park | na | 8 | 280 | various | 125.0 |
| Elysian | na | 8 | 700 | various | 146.0 |
| Eaton Park | 6 | 8 | 4,220 | various | 698.8 |
| Others (including Springville and The Meadow and others in London and Melbourne) | >50 | 8 | 5,820 | various | 2,882.4 |
| Sub Total – NPV of future profit | 7,236.2 | ||||
| Property development BV | 7,345.6 | ||||
| RNAV of property development | 14,581.8 | ||||
| -35% discount | -5,103.6 | ||||
| Value for property unit | 9,478.2 | ||||
| Investment properties | Carrying value (MYRm) | Stake (%) | Total (MYRm) |
|---|---|---|---|
| 691.5 | 100 | 692.0 | |
| ERS Energy | Equity Value (MYRm) | Stake (%) | |
| 667.0 | 30 | 200.0 | |
| Holding company’s net cash/ (debt) | (4,445.5) | ||
| SOP value | 31,316.7 | ||
| Intrinsic value per share | 5.43 | ||
| 8% ESG premium | 0.43 | ||
| TP | 5.86 | ||
Source: Company data, RHB
Recommendation History
| Date | Recommendation | Target Price | Price |
|---|---|---|---|
| 2025-07-01 | Buy | 5.9 | 5.0 |
| 2025-06-30 | Buy | 5.6 | 4.8 |
| 2025-06-27 | Buy | 5.6 | 4.7 |
| 2025-06-24 | Buy | 5.6 | 4.7 |
| 2025-06-17 | Buy | 5.6 | 4.8 |
| 2025-05-18 | Buy | 5.8 | 4.6 |
| 2025-05-05 | Buy | 5.8 | 4.4 |
| 2025-04-17 | Buy | 5.8 | 3.9 |
| 2025-03-27 | Buy | 5.8 | 4.3 |
| 2025-03-24 | Buy | 5.8 | 3.9 |
| 2025-02-06 | Buy | 5.8 | 4.5 |
| 2025-01-26 | Buy | 5.8 | 4.2 |
| 2025-01-20 | Buy | 5.8 | 4.3 |
| 2025-01-13 | Buy | 5.8 | 4.8 |
| 2024-12-31 | Buy | 5.8 | 4.7 |
Source: RHB, Bloomberg
RHB Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage
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