Prospects remain strongly in its favour
? 9MFY22 results were above expectations: core net profit surged 46% yoy.
? Vietnam property and MRT 2 profits were two key drivers. Order book is at a
new all-time high of RM12.4bn with a robust domestic and overseas pipeline.
? Retain Add with a higher RM4.35 TP. 38 sen (11% yield) special dividend
post-highway deal completion in FY7/23F is an added catalyst.
MRT 2 and Vietnam property anchored 9MFY22’s outperformance
Gamuda reported a stronger-than-expected earnings performance in 9MFY7/22, anchored
by robust post-lockdown earnings recognition from a Vietnam property project in 3QFY22
and tail-end profit (cost savings) from the MRT 2 project. This led to a 5.6% pts qoq rise in
3QFY22 EBITDA margin to 20.1%, with 9MFY22 EBITDA margin of 17.1%, higher than
our FY22F of 12%. 9MFY22 results were above expectations; core net profit of RM544.4m
came in at 85% of our and consensus full-year estimates. Guidance was that 4QFY22F
core net profit is likely to be equally strong, driven by overseas and domestic property
development, with continued profit recognition from MRT 2, which will spill over into
1HFY7/23 and billings from new projects. Overall, 3QFY22 core net profit surged 56% yoy
(+25% qoq) while 9MFY22 core net profit rose 46% yoy. The group declared a second
interim DPS of 6 sen, bringing the total to 12 sen and in line with our full-year forecast. The
incoming special dividend of est. 38 sen/share (RM1bn payout) from the highway
divestment deal (targeted full completion in Aug 22) will be realised in FY7/23F.
Allaying concerns of margin compression; order book at new high
The group allayed concerns about rising material costs, citing minimal and manageable
risk of a severe construction margin compression in FY22-23F. Key reasons: 1) Domestic
contract margins are insulated by escalation clauses (payment from the government), 2)
Tender pricing for RM31bn MRT 3 should largely reflect prevailing material prices; contract
award is likely to be in early-CY23F, 3) Singapore and Taiwan ongoing contracts (ahead
of schedule) include escalation clauses, and 4) Two newly-secured contracts in Australia
worth RM8.5bn (on effective JV share) are government-funded priority infra projects with
room to negotiate/claim material price increases. Order book growth prospects remain
robust over the next 1.5 years. The recent RM2.1bn job (effective share) for the Coffs
Harbour Bypass project in New South Wales (NSW) raised the order book to a new alltime high of RM12.4bn. Potential new jobs in the pipeline include MRT 3, Penang South
Island (PSI), and the North-East Link project in Melbourne (new shortlisted tender); these
could lift order book to at least RM20bn, mitigating recent risks of domestic contract delays.
Retain Add rating with higher TP of RM4.35
We raise FY22F EPS by 17.6% as we impute a higher EBITDA margin and retain FY23-
24F pending completion of the highway deal. We raise TP by 2% (+10 sen) to RM4.35 as
we update for balance sheet items (unchanged 10% RNAV discount). Reiterate Add.
Upside risks: domestic and overseas jobs wins. Downside risks: project delays.