The construction group closed at RM8.28 yesterday, its highest since its listing in 1992. Its shares have soared 47% over the last two months and 79% year-to-date (YTD) on a slew of contract wins.
At 3.56pm, it was down 0.85% or 7 sen at RM8.21, valuing it at RM22.76 billion.
In a note today, Kenanga said it was positive on Gamuda’s latest contract win. It also said the group has secured six contract wins YTD with a total value of RM15.4 billion-RM15.8 billion.
Of these, four are with firmed contract value totalling RM8.8 billion while two civil work contracts for the Upper Padas Hydroelectric Power Plant (estimated at RM2 billion) and the Penang LRT Mutiara Line (RM4.6 billion-RM5 billion) projects are still under negotiation, it noted.
“Nonetheless, we downgrade our call to ‘underperform’ from ‘outperform’ as its share price has run ahead of its fundamentals,” it added.
Kenanga maintained its target price (TP) at RM7.29, which is 11.2% lower than the current share price.
Meanwhile, BIMB Securities has a “take profit” call on Gamuda, a rating which means a stock has reached its target price and investors should look to accumulate at lower levels.
Bursa Malaysia’s construction stocks have largely outperformed other sectors this year, fuelled by optimism on the government’s roll-out of key infrastructure projects, and the growing number of data centre construction jobs.
In a bourse filing yesterday, Gamuda announced its JV with French rail engineer Alstom SA had secured the Metronet high-capacity signalling project.
Awarded by the Public Transport Authority of Western Australia, the contract is for a new automatic train control system to replace the existing signalling and train control systems on Perth’s suburban rail networks.
The JV alliance comprises Gamuda’s wholly owned subsidiary DT Infrastructure Pty Ltd and Alstom Transport Australia Pty Ltd, a wholly owned unit of France’s Alstom. Gamuda has a 46% stake in the JV, while Alstom holds the remaining 54%.
While the contract value of A$1.6 billion seems huge, the downside is that the contract runs over 10 years. Gamuda is expected to rake in revenue of up to A$737 million (RM2.3 billion) from the project.
Analysts have noted the 10-year contract duration is much longer than Gamuda’s other jobs which typically last up to four years, in addition to profit margins being significantly lower for such Australian jobs.
However, several other research houses believe Gamuda’s share price can still run further. TA Securities has kept its “buy” call, and its TP at RM9.94, it said in a note today.
It said the Australian contract win has boosted the group’s outstanding order book to a record high of RM26.5 billion, equivalent to 4.8x FY2023 construction revenue.
RHB Investment Bank and Public Investment Bank both maintained their “buy” calls on Gamuda with TP of RM9.68 and RM9.20, respectively.