Gamuda Berhad's 24% Revenue Surge Signals Sustainable Growth Amid Margin Pressures

Gamuda Berhad (GAML) delivered a robust third-quarter performance in fiscal year 2025, with revenue surging 24% year-on-year (YoY) to MYR 3.09 billion, fueled by strong domestic construction activity and strategic international project wins. While margin pressures emerged due to elevated expenses, the company's expanding orderbook, cash-rich balance sheet, and analyst-backed price targets suggest its growth trajectory remains intact. Here's why investors should take note.

Revenue Growth Aligns with Industry Forecasts, Outperforming Competitors

Gamuda's 24% revenue growth handily exceeds the Malaysian construction industry's projected 15% annual growth rate, underscoring its competitive edge. Domestic construction revenue jumped 85.7% YoY to MYR 616.6 million, driven by a MYR 35 billion orderbook—41% of which now comes from local projects. This shift reflects a successful pivot toward domestic demand, bolstered by government infrastructure spending. Overseas contributions, particularly in Australia's Sydney Metro West and Taiwan's RM3.7 billion port project, further diversified revenue streams.

The 24% revenue growth contrasts sharply with the prior-year's decline in Q3 FY2024, when a Singapore property project's absence skewed results. Excluding one-off factors, revenue growth reached 9%, indicating consistent operational momentum.

Strategic Moves: Expanding Globally and into Renewables

Gamuda's pursuit of Fletcher Building's construction arm signals ambition to capitalize on New Zealand's infrastructure boom. This acquisition, if realized, would add MYR 2.2 billion in annual revenue and strengthen its regional footprint. Meanwhile, its renewable energy partnership in Australia—a MYR 1.5 billion solar project—marks a strategic diversification into high-growth, sustainable sectors. These moves align with global decarbonization trends and reduce reliance on traditional construction.

Financial Health: Strong Cash Reserves, Manageable Debt

Gamuda's financial position remains resilient:
- Cash reserves hit MYR 3.48 billion, a 14% increase YoY, providing liquidity for debt servicing and acquisitions.
- Net gearing stands at 45%, comfortably below its 70% self-imposed limit.
- EPS stabilized at MYR 0.043, despite margin compression to 8% (from 9.5% in Q3 2024).

Analysts highlight the company's ability to navigate margin pressures through cost discipline and higher-margin projects. For instance, domestic construction net profit surged 70% YoY to MYR 238.17 million, demonstrating operational leverage.

Analysts Uplift Price Targets Amid Buy Ratings

Analyst consensus is overwhelmingly bullish:
- Public Bank, RHB, and TA Research maintain “BUY” ratings with price targets ranging from MYR 5.30 to MYR 5.88, representing 4%–15% upside from current levels.
- Phillip Capital cites “contract-winning momentum” and a MYR 30 billion orderbook as catalysts, backing a MYR 5.33 target.

Risks to Watch: Margin Pressures and Overseas Execution

While the outlook is bright, risks persist:
1. Overseas project delays—notably in Vietnam's Celadon City and Singapore's OLA Residence—have dented property division profits.
2. Currency volatility could erode earnings from foreign operations.
3. Margin compression remains a concern, though domestic construction's strong performance suggests this is temporary.

Investment Thesis: Compelling Entry Point for Long-Term Growth

Gamuda's MYR 30 billion orderbook, strategic international expansions, and sustainable energy ventures position it as a long-term growth play. With a current stock price hovering near MYR 4.80 and analyst targets averaging MYR 5.50, the stock appears undervalued.

Investors should consider:
- Buying on dips below MYR 4.90 for a 12–18-month horizon.
- Monitoring execution risks, particularly in overseas markets.
- Watching for contract wins in Australia and New Zealand, which could trigger further analyst upgrades.

Conclusion

Gamuda Berhad's Q3 results affirm its ability to grow revenue sustainably despite margin headwinds. With a fortress balance sheet, strategic diversification, and analyst optimism, the stock offers a high reward-to-risk ratio for investors willing to look past near-term volatility. For those focused on infrastructure and green energy trends, Gamuda remains a top pick in Southeast Asia's construction sector.

Consider this a “buy” for long-term growth, but brace for short-term volatility tied to project execution.