Gamuda shares slide amid earnings reset

PETALING JAYA: Gamuda Bhd’s two-year profit forecasts have been slashed in light of slower revenue recognition from Malaysian construction works and a delayed Hanoi property launch.

Kenanga Research cut its net profit projection for the financial year of 2026 (FY26) by 23% to RM1.06bil.

As for FY27, the forecast was reduced by a larger 29% to RM1.39bil.

The revision followed the research house’s site visit to Gamuda, after which it deemed the company’s earnings forecasts too aggressive.

It expects margin recovery to be slower-than-anticipated on high-margin Malaysian projects, while lower-margin Australian works are at advanced stages.

Kenanga Research also reduced its target price to RM5.30 from RM6.13 per share, with the construction business valued at an unchanged 22 times 2026 price-to-earnings ratio, in line with other large-cap contractors such as IJM Corp Bhd and Sunway Construction Group Bhd.

Key risks to its call include delays in the rollout of key public infrastructure projects in Malaysia, which could push back margin recovery, rising input costs and labour shortages.

Additional risks stem from overseas operations, including changes in government policies towards foreign businesses, foreign exchange volatility, and liquidated ascertained damages from cost overruns and delays.

Kenanga Research lowered Malaysia revenue assumptions to RM13bil-RM18bil from RM15bil-RM22bil, solely due to the S-curve effect, while maintaining its job win assumptions at RM22bil-RM27bil.

This results in reduced overall earnings before interest and tax margins of 6% to 6.5%, down from 7.5% to 7.8%.

On the property side, Kenanga Research reduced its FY26 property revenue forecast to RM4.5bil from RM4.9bil, while maintaining the FY27 target at RM5bil.

Having surpassed end-2025 order-book target of RM40bil to RM45bil, the next milestone is an outstanding order book of RM50bil by the end of 2026.

Gamuda expects the tender outcome for two Pearl Computing data centres in Springhill in 2026 and has a strong chance of securing another project in Taiwan.

In Australia and New Zealand, the company has been shortlisted for a project in Brisbane and the Northland Corridor Highway, respectively.

Domestically, the Ulu Padas water supply project is expected to be finalised soon, and Gamuda is bidding for the Penang light rail transit Package 3 turnkey system and rolling stock contracts.

Year-to-date, the share price has tumbled 17%, underperforming the FBM KLCI’s 3% gain. The shares fell 1.71% yesterday, closing at RM4.03.

The sell-off is largely attributed to market concerns regarding exchangeable bonds and potential earnings cuts.

Kenanga Research believes this price correction, coupled with the earnings reset, presents an attractive buying opportunity, as Gamuda’s long-term fundamental value of its order book remains intact.

The research house also believes concerns over Gamuda’s exchangeable bonds are overblown, after details emerged that indicate at least 57% upside before bondholders would be entitled to an exchange.