GAMUDA: Major Infrastructure Win Strengthens Order Book, Analyst Reaffirms ‘Buy’ Recommendation

A leading investment bank has reiterated its “Buy” recommendation, maintaining a target price following news of a significant infrastructure contract award. The new project, secured by a joint venture, is expected to substantially bolster the company’s order book, ensuring multi-year earnings visibility.

Contract Details

The company, through its 30%-owned associate Naim Gamuda JV Sdn Bhd (NAGA), has been awarded an RM1.1 billion contract for Work Package Section 1 of the Northern Coastal Highway (NCH) in Limbang, Sarawak. This section involves the construction of approximately 14.7 kilometers of four-lane dual carriageway, including bridges, a flyover, earthworks, and associated infrastructure. The construction period is set for 48 months from the date of site possession. Management indicates an effective order book intake of approximately RM0.5 billion from this award.

Strategic Significance

Analysts view this contract win constructively, noting that it deepens the company’s involvement in Sarawak’s multi-year infrastructure roll-out, which is increasingly state-led, fully funded, and executed under streamlined governance. The NCH is strategically positioned to complement the existing Pan Borneo Highway, establishing a domestic coastal route that links Miri-Limbang-Lawas without traversing Brunei. This is anticipated to reduce travel times, lower logistics costs for various supply chains, improve port access, and ultimately catalyse regional economic development in northern Sarawak. The joint venture is also well-positioned to compete for subsequent sections of the approximately RM6.0 billion Phase I of the NCH as tendering progresses, leveraging its design-and-delivery expertise.

Financial Outlook and Valuation

On the financial front, the new package is expected to yield an 8% pre-tax profit (PBT) margin. Based on the effective contract value, the project is estimated to generate a cumulative net profit of approximately RM30.4 million over its construction period. Factoring in this latest award, the company’s outstanding order book is projected to rise to approximately RM37.7 billion, equivalent to 3.6 times its FY24 construction revenue. This robust order book significantly reinforces multi-year earnings visibility.

Despite the substantial new contract, the investment bank has maintained its FY25-27F earnings projections, noting that the award falls within its existing replenishment assumptions for the year. The “Buy” call on the stock is consequently maintained.