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Gamuda's NSW project to contribute over RM100 mln in profit -- Analysts

20/06/2022 02:40 PM

KUALA LUMPUR, June 20 (Bernama) -- The RM4.12 billion Australian highway project awarded to Gamuda Bhd and its joint-venture partner last week is expected to contribute more than RM100 million to the Malaysian construction group’s pre-tax profit, according to analysts.

In a note today, MIDF Research has projected earnings before tax of about RM104 million over the four-year tenure of the Coffs Harbour Bypass construction project, which was awarded by the New South Wales (NSW) government.

The research house said this is assuming a “conservative” profit margin of five per cent.

“We are optimistic about the latest contract win, which is expected to deliver positive results until Gamuda’s financial years ending July 31, 2026 and 2027 (FY26/FY27),” it said, upgrading its recommendation to a “buy” from “trading buy”.

MIDF Research has also revised its target price for the stock to RM4.02 from RM3.89 previously.

Over the weekend, Gamuda announced that Ferrovial Gamuda Joint Venture (FGJV), a 50:50 joint venture between it and Spain-headquartered Ferrovial SA, has secured the project, which is expected to start major construction work early next year and be completed by late 2027.

MIDF Research said it is positive on further surprises from Gamuda Australia, which has been shortlisted for the delivery of the northern section of the North East Link in Melbourne -- set to be the largest road project in the state of Victoria.

The research house is also optimistic on Gamuda’s prospects in Australia as the builder continues to clinch mega projects there while being the potential frontrunner of the lion’s share of Mass Rapid Transit Line 3 (MRT3) in Malaysia.

"Note that there could potentially be a special dividend issuance by Gamuda following the disposal of its highway concessions to Amanat Lebuhraya Rakyat and we estimate a conservative payout of about 15 per cent from the RM2.35 billion cash proceeds, which would translate to around 14 sen per share,” it said.

Meanwhile, Public Investment Bank (PIVB) said that considering a margin of eight per cent as well as a base corporate tax rate in Australia of 30 per cent, the latest project will contribute about RM17.2 million in FY23, RM29.4 million each in FY24 to FY26, and RM12.3 million in FY27 net profit based on certain levels of work completion each year. 

It said the contribution from the contract is “fair”, estimated at roughly two to four per cent of the group's net profit. 

Affirming its “outperform” rating and target price of RM4.09 on Gamuda, PIVB added: “We are leaving our forecasts unchanged as this makes up part of our FY22 order book replenishment assumptions of RM10 billion, in line with management’s job replenishment target.”

At lunch break, Gamuda shares were 17 sen lower at RM3.43 each, with 1.09 million shares changing hands. 

Trading in its shares and structured warrants resumed from 10 am today after being suspended for an hour. 


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