Gamuda's new rail project in Taiwan supports its strategy to become strong regional player

28/10/2022 11:41 AM

KUALA LUMPUR, Oct 28 (Bernama) -- Gamuda Bhd’s new rail project in Taiwan worth RM2.13 billion supports its effective diversification strategy out of Malaysia in a bid to become a strong regional player, said MIDF Research.

The tunnelling and rail expert has secured a NT$14.5 billion (RM2.13 billion) underground railway project from the Taiwan Ministry of Transportation and Communications’ Railway Bureau, a state-owned railway company.

The contract of 60:40 joint venture comprising Gamuda and Asia World Engineering & Construction Co (AWEC) is expected  to bring in NT$8.7 billion (RM1.28 billion) revenue.

“Assuming a rather conservative margin of six per cent, the project is expected to deliver net earnings of RM76.8 million or RM9.6 million annually until financial year 2031 (FY2031),” said MIDF Research. 

The project involves works for the Pingzhen Commuter Station, under Package CJ18 of the Construction and Completion of the Taoyuan City Underground Railway Project, to be completed in eight years. 

On the other hand, the research firm said Gamuda continued to outdo itself by setting another outstanding order book high of RM15.28 billion, which was heavily weighted towards overseas jobs, providing it with strong earnings visibility up to FY2026. 

“The bulk of it still comes from jobs in Australia, totalling RM8.2 billion, or 53.7 per cent of its order book. The new job win in Taiwan lifts its outstanding jobs in Taiwan to RM2.28 billion. 

“The other components of its order book are RM3.3 billion jobs in Malaysia and RM1.5 billion in Singapore. This is in line with management’s aim of making Gamuda a regional player,” it said.

MIDF Research also noted the restructuring of Gamuda’s four major highway concessions comprising KESAS, Sprint, Litrak and Smart was completed on Oct 13, 2022, which saw all four entities fully acquired by Amanat Lebuhraya Rakyat (ALR), marking Gamuda's exit from the toll concession business. 

“This also means that the much-awaited special dividend will soon be issued, which we expect to be in December. We expect Gamuda to announce its special dividend of 38 sen per share towards the end of November, equivalent to about RM1 billion of its RM2.33 billion in total proceeds,” it said. 

Meanwhile, PublicInvest Research said that besides the new contract win, its property arm Gamuda Land has signed an memorandum of understanding with Tenaga Nasional Bhd to develop two electron stations within its townships - Gamuda Cove and Gamuda Gardens - to pave the way towards a sustainable lifestyle. 

“We like the fact that the group constantly delivers and makes an effort to reduce its carbon footprint while stepping up on its environmental, social and governance-related commitments,” it said. 

All factors considered, MIDF Research has maintained its “buy” call with an unchanged target price (TP) of RM4.71 for Gamuda, while PublicInvest reiterated its “outperform” rating with an unchanged TP of RM4.30.


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