Gamuda Bhd
Outperform. Target price: RM6.20
Transport Minister announced last Friday that the federal government had approved the Penang LRT project, now known as the Mutiara LRT Line, to come under the purview of MRT Corp. The project will be split into three components:- (i) Segment 1 civil work – Silicon Island – Komtar, (ii) Segment 2 civil work – Komtar-Penang Sentral, and (iii) turnkey system and rolling stock contract. The project is expected to kick start this year and to be completed by 2030.
GAMUDA’s 60%-owned SRS Consortium Sdn Bhd (SRS) has been awarded the Segment 1 of the Penang LRT project with the terms and value to be negotiated with MRT Corp within the next six months. Meanwhile, Segment 2 and the turnkey contract for systems and rolling stocks on a “build-maintaintransfer” basis will be awarded via open tenders along the way.
We are highly positive on the latest development. While the award of Segment 1 to SRS has been widely expected by the market, this award has erased the concern over further delays of the project. Recall, a price tag of RM10 billion is mentioned in Budget 2024 for the Penang LRT project. Assuming RM320-350 million per km for civil works, the 24km segment 1 LRT project would be worth about RM7.68.4 billion, translating to RM4.6-5 billion for GAMUDA’s 60% portion of the job.
With this, GAMUDA’s YTD contract wins have increased by 66% to 74% from RM6.8 billion (three major job wins) to RM11.3 billion to RM11.8 billion against our FY24 job replenishment assumption of RM12.5 billion..
We therefore maintain our forecasts, TP of RM6.20 and OUTPERFORM call.