TA SECURITIES Research tweaked upwards Gamuda Bhd’s target price to RM4.11 (from RM3.91 previously) while reiterating its “buy” call following a A$1.35 bil (RM4.1 bil) job award in New South Wales.
The engineering, property and infrastructure group has alongside Ferrovial Construction Australia (FGJV) – on a 50/50 joint venture basis – been awarded a contract by the New South Wales Government to design and construct the main package of works for the Coffs Harbour Bypass project.
“This new job win from Australia has exceeded our order book replenishment assumption of RM9 bil for FY2022,” analyst Chan Mun Chun pointed out in a company update. “After factoring in this new contract, we raise our earnings forecasts for FY2022/FY2023/FY2024 by 0.5%/3.1%/4.1% respectively.”
According to TA Securities Research, this is Gamuda’s second major job win in Australia, currently boosting its outstanding order book to about RM13 bil.
“We are positive about the job win as it will help Gamuda further reduce the concentration risk of being overly dependent on the local construction projects,” opined the research house.
In a media statement yesterday (June 19), Gamuda said the project will be funded by the Australian and New South Wales Governments to improve safety while ensuring a more reliable travel and commuting experience.
“Therefore, we believe the capital requirements from FGJV for undertaking the project will be minimal,” reckoned TA Securities Research. “Meanwhile, the partnership with Ferrovial Construction will help reduce project execution risk as GAMUDA is still relatively new in Australia.”
Assuming a profit before tax (PBT) margin of 7%, the research house expects the project to contribute a net profit of RM287 mil to FGJV throughout the construction period.
Coffs Harbour is located on the NSW North Coast, 550km north of Sydney. FGJV will design and construct a 14km new and upgraded four-lane highway.
Planning and detailed design works are expected to commence immediately. The bypass is expected to open to traffic in late 2026 and is scheduled to be fully completed in late 2027.
Gamuda closed 20 sen or 5.88% higher on Friday (June 17) with 3.5 million shares traded, thus valuing the company at RM9.19 bil. – June 20, 2022
