Gamuda JV bid for Sydney highway job could contribute RM181.7m in earnings over four years — PublicInvest Research

KUALA LUMPUR (April 21): Gamuda Bhd’s joint venture (JV) bid for the A$2.6 billion (RM7.27 billion) M6 Stage 1 project in Sydney could contribute RM181.7 million to its pre-tax profit over four years.

In a note today, PublicInvest Research noted that should Gamuda’s JV with BMD Construction Pty Ltd (Gamuda-BMD) win the motorway construction project — assuming it is a 50-50 JV between the two — Gamuda is expected to replenish a total of RM3.6 billion into its order book by the end of this year.

“With a profit margin of 5%, this project will contribute circa RM181.7 million to its pre-tax profit, spreading over four years — an accretion of RM45.4 million a year to our pre-tax and 5.7% upside to our net profit numbers, on average. Nevertheless, we do not make any changes in our forecast yet, pending management’s further guidance while maintaining our conservative stance at this juncture,” the research house said.

If successful, this would be Gamuda’s first Australian project.

However, PublicInvest opined that it was a 50-50 chance whether Gamuda would be able to clinch the contract given the strong profile of the two other contenders: a JV between Acciona Construction Australia Pty Ltd and Samsung C&T Corp (Acciona-Samsung), and a JV between CPB Contractors Pty Ltd and Ghella Pty Ltd (CPB-Ghella).

These chances are despite the probability that Gamuda-BMD could turn out to be the lowest bidder among the three.

The research house did note that Gamuda’s JV partner BMD has the resources and experience to deliver projects ranging from US$1 million to US$1 billion in value.

Additionally, BMD has delivered around 200 projects, of which 87% were from repeat clients within Australia. 43% of the submissions won were highly commended, illustrating its ability to deliver best-for-project outcomes, said PublicInvest.

The M6 Stage 1 project is a 4km tunnel which connects the M5 Motorway at Arncliffe to President Avenue in Kogarah — thus providing more direct access from southern Sydney to the wider Sydney motorway network.

The project is expected to take approximately four years to complete and subject to approval from the authorities, will be open to traffic in 2025.

“We downgrade our call on Gamuda to 'neutral' given the limited upside potential with an unchanged TP of RM3.09. Gamuda’s share price has rebounded by +32.5% from the year-low hence we think that the market has already priced-in the positives,” it noted.

At 10:24am, shares in Gamuda were trading 1.21% or four sen lower at RM3.26, giving it a market capitalisation of RM8.19 billion.

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