CGS has reiterated its ADD call on Gamuda Bhd and raised its target price to RM6.05, citing the construction group’s record orderbook, improving earnings visibility and diversified exposure across infrastructure and property markets.
The research house said Gamuda’s shares have underperformed despite a series of major data centre contract wins and an orderbook that has already surpassed its end-2026 target of RM50 billion.
CGS estimates the group could end 2026 with an orderbook of about RM60 billion, supported by a visible pipeline of new contracts.
As at September 2026, Gamuda’s orderbook stood at RM61.6 billion, with about 79% still at an early execution stage of between zero and 20% completion.
CGS believes this should lead to a more pronounced earnings recovery as projects move further along their construction curves, with 1QFY27 potentially marking an inflection point.
Construction Margins Seen Recovering
One key investor concern has been the relatively muted recovery in construction margins despite the surge in new orders.
CGS said this should improve as Gamuda’s newer projects progress, while pointing to the group’s engineering capabilities and historical ability to preserve margins even under difficult operating conditions.
It cited Gamuda’s performance following the downsizing of the MRT2 project in 2018, noting that the group still achieved construction pre-tax margins of about 12% to 17% in FY2021 and FY2022 despite the reduction in project scope.
The research house also sees upside from data centre projects, prompting it to lift its FY2027-FY2028 earnings per share forecasts by between 2% and 6% to account for stronger expected margins.
High Gearing Viewed As Temporary
CGS also addressed concerns over Gamuda’s net gearing, which stood at about 0.7 times as of April 2026.
The research house considers the elevated gearing largely a timing issue following the acquisition of four parcels of land in Vietnam during the first quarter of 2026 for quick-turnaround property projects.
These developments are expected to underpin Gamuda’s FY2027 presales target of RM7 billion, representing growth of about 75% year-on-year, backed by a RM10 billion launch pipeline.
Despite the higher gearing, CGS said Gamuda’s interest coverage remains comfortable at an estimated 7.6 to 9 times for FY2026-FY2027.
Foreign Shareholding At Low, Re-Rating Seen Possible
CGS also disputed concerns that Gamuda may be over-owned by investors.
Foreign shareholding stood at 23.6% in August 2026, its lowest level since January 2024, suggesting there is room for additional foreign participation if quarterly earnings strengthen.
The research house believes stronger earnings delivery could become an important catalyst for a share price re-rating.
Diversification Offers Longer-Term Visibility
While investors have increasingly focused on pure-play data centre beneficiaries, CGS noted that data centres account for only about 15% of Gamuda’s total orderbook.
Rather than being a weakness, the research house sees Gamuda’s diversification across markets and infrastructure segments as an advantage.
The group has major operations across Malaysia, Taiwan, Singapore and Australia, with exposure to mass rapid transit, rail, renewable energy, water infrastructure and other large-scale projects.
CGS said this gives Gamuda stronger three- to four-year earnings visibility and reduces reliance on any single country or infrastructure sub-sector.
Its property business is similarly diversified geographically.
About 46% of Gamuda’s FY2027 property launches are expected to come from Vietnam, 29% from Singapore and 25% from Malaysia.
CGS said the mix could help offset slower township sales in Malaysia, particularly given strong demand for the group’s quick-turnaround developments in Vietnam.
The research house highlighted Persa Place, the first high-rise component of Gamuda’s Springville development in Vietnam, which was fully sold within two hours of its launch in May 2026.
CGS raised its sum-of-parts target price to RM6.05, reflecting higher earnings assumptions and the rollover of its valuation base to FY2027.
It said Gamuda’s diversified orderbook, visible contract pipeline and strengthening property contribution continue to support its positive view.
Potential re-rating catalysts include additional construction wins, stronger property sales and easing raw material costs.
Downside risks include delays in contract awards and higher construction material prices.
Gamuda share price closes at 4.82 on Friday, down 13% from a year ago.
