GAMUDA: Target Price Raised on Robust Order Book and New Contract Win

A recent investment bank report has reaffirmed its positive stance on a major construction conglomerate, elevating its target price following the securing of a significant new infrastructure project. The company, a prominent builder in Malaysia, has been awarded a RM1.13 billion contract for the Limbang section of the Northern Coastal Highway in Sarawak, significantly bolstering its order book.

Contract Details and Order Book Impact

The newly secured project, undertaken by a 30:70 Joint Venture, involves the construction of a 14.7km, four-lane dual carriageway. This extensive undertaking in Limbang includes bridges, a flyover, earthworks, and other associated works, with an estimated four-year construction period. The company’s attributable share of the project is approximately RM0.5 billion.

This latest contract win is a pivotal development, pushing the group’s total outstanding order book to an estimated RM35.1 billion, an increase of 1.4%. The investment bank notes that this addition falls within its existing RM16 billion order book replenishment assumption for CY25, indicating a healthy pipeline of work. The project is anticipated to contribute approximately 0.6% to the company’s net profit annually over its four-year duration, without requiring adjustments to current earnings estimates.

Investment Outlook and Recommendation

The investment bank has reiterated its “Outperform” call on the company, citing the encouraging order book replenishment prospects as a key factor. Concurrently, the 12-month target price has been raised from the previous RM5.60 to RM6.20, reflecting a higher Sum-of-the-Parts (SOTP) derived valuation. This revised target price pegs a higher Price-to-Earnings (PER) ratio of 32x for the construction segment, underscoring confidence in the company’s growth trajectory driven by its robust project pipeline.