GAM: Strong Earnings Performance Drives Target Price Higher Amid Positive Outlook
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
Analysts at a leading investment bank have highlighted a robust financial performance for the fiscal year ending July 2025 (FY25), with core net profit recorded at MYR982.5 million. This represents a 7.7% increase year-on-year and marginally surpassed the bank’s own projections, achieving 101% of its full-year forecast. However, the result fell slightly short of the broader market consensus, reaching 96% of Street expectations.
Performance Review
The impressive results were primarily fuelled by a stellar performance from the construction segment, which saw its pre-tax profit (PAT) surge by 25% year-on-year to MYR625.6 million. This marks an annual record high for the segment, with its net margin improving to 5% from 4.7% in FY24. This notable improvement was largely attributed to a higher contribution from domestic project earnings, which comprised 49% of the total in FY25, up from 36% in the prior year.
Conversely, the property arm experienced an 8% year-on-year decline in PAT for FY25. This was mainly due to the absence of significant one-off earnings from the OLA Residences project in Singapore, which had provided a substantial boost in FY24.
Operational Adjustments and Risks
Despite the positive overall picture, analysts observed a slower pace in the execution of recently secured projects. Many substantial FY25 job wins are still progressing at the lower end of their S-curve, suggesting an initial period of softer work volume. Consequently, FY26 earnings estimates were modestly revised downwards by 7%, with earnings expected to be backloaded and contribute more significantly in FY27F and FY28F. A key risk identified is the potential for slower-than-expected replenishment of the company’s job order book.
Future Growth Trajectory
Looking ahead, the company is strategically aiming to expand its orderbook to MYR50-55 billion by the end of calendar year 2026. To achieve this, it needs to secure MYR20-25 billion in new jobs during CY26, an objective deemed achievable given a strong pipeline of tenders totalling approximately MYR50 billion across domestic, Australian, Singaporean, and Taiwanese markets.
The property division also holds an ambitious sales target of MYR5.5 billion for FY26, an increase from MYR4.1 billion in FY25. This target is supported by planned MYR2 billion launches in Malaysia and over MYR4 billion in remaining Gross Development Value (GDV) from quick turnaround projects in Vietnam.
Reflecting the positive outlook and strategic initiatives, the investment bank has adjusted its valuation base to FY27 from FY26 and introduced FY28F earnings, which incorporate a MYR20 billion job win target for that year. The bank maintains its “Buy” rating, underscoring confidence in the company’s strategic capabilities in data centers and renewable energy projects, with an 8% ESG premium included in the valuation.
