PETALING JAYA: TA Research is generally positive about Gamuda Bhd’s near-term outlook.

       It said the key takeaways from a recent meeting with the group include strong earnings feasibility, continuing to explore opportunities abroad and maintaining its RM5.6bil new property sales target.

       On the group’s earnings, TA Research said Gamuda has demonstrated an impressive trajectory, achieving year-on-year core net profit growth of 32.9% in the first quarter of financial year 2024 (1Q24), driven by strong overseas performance in the construction and property divisions.

       “We believe that this momentum should be sustainable, backed by a record high outstanding construction order book of RM25.8bil and unbilled property sales of RM6.7bil,” the research house said in its latest report.

       The potential upside to future earnings may arise from the Mass Rail Transit 3 (MRT3) project, where the group is a front runner for the tunnelling package.

       “However, management indicates that the commencement of MRT3 is more probable in the second half of 2024, considering the extension of tender validity to end-March this year from end-December 2023,” added TA Research.

       On a positive note, the research house said progress on the Penang Light Rail Transit project, where Gamuda is poised to play a crucial role, appeared promising.

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       According to Gamuda’s management, discussions are in an advanced stage and the anticipated rollout is expected by the end of 2Q24, following the finalisation of project implementation details.

       Meanwhile, Gamuda’s management conveyed that the group is actively pursuing opportunities abroad by bidding for mega infrastructure projects in Australia, Singapore and Taiwan.

       “We are upbeat on the Australian construction outlook, buoyed by the Australian government’s commitment to a 10-year, A$120bil infrastructure pipeline.

       “Assuming an annual average allocation of A$12bil, we anticipate that Gamuda, leveraging its well-established track record and comprehensive construction capabilities, can secure about A$2.5bil worth of projects each year,” explained TA Research.

       It noted that Gamuda’s management also remains confident in achieving its RM5.6bil new property sales target.

       This was despite achieving only RM454mil in new property sales in 1Q24, representing just 8% of its financial year 2024 (FY24) sales target of RM5.6bil.

       Anticipating a sales upswing in the coming quarters, TA Research said the optimism is based on robust domestic sales, especially with the debut launch of Gamuda Park in mid-2024 and an increased contribution from quick turnover projects (QTPs) overseas.

       In terms of land banking strategy, Gamuda is strategically realigning its portfolio to focus more on QTPs, said the research house.

       This involved adding two more QTPs in 2024, bringing the total to 10 QTPs, with plans to introduce two or three new QTPs annually, thereafter to strengthen the division’s efficiency and agility in the market.

       Hence, TA Research has retained its FY24 to FY26 earnings forecasts for Gamuda with a reiterated “buy” call on the stock.

       “We arrive at a new target price of RM5.55 from RM5.19 previously.

       “This incorporates an increased price-to-earnings ratio multiple of 24 times for the construction division to reflect the strong regional expansion outlook,” it added.

       Additionally, TA Research has performed some housekeeping on the property division’s return on net asset value (RNAV) estimate while retaining its valuation approach with a 50% discount to RNAV.