---
endpoint: analytics
pattern: Infrastructure
status: done
latency_ms: 240667
conversation_id: 08eb1eb3-c6ab-4fec-8f9d-2c3462394276
citations: 3
created: 2026-05-31 20:08:31Z
---

# What’s the bull case bear case for Gamuda?

# Gamuda Berhad (GAM MK) — Bull Case / Bear Case

**Current CLSA stance:** **High-Conviction Outperform (HC O-PF), TP RM5.50** (post-1:1 bonus issue; raised from O-PF on 23 Feb 2025, original TP RM11.00 set 4 Dec 2024 pre-bonus) [14]. Analyst Joe Liew. The latest dedicated coverage notes are from Dec 2024, and the most recent strategy commentary (Jun 2025) reiterates Gamuda as a preferred data-centre construction play [11][12].

---

## BULL CASE

### 1. Orderbook supercycle — the central thesis
- Unbilled construction orderbook has grown **~7x** from RM4.5bn in 2021 to **~RM32bn currently**, with CLSA forecasting **RM38bn by end-FY25 (Jul 2025) and RM40bn by end-FY26** [1][2]. Management is even more bullish, guiding to **RM40–45bn by end-CY25** [6].
- Historical analogue: Gamuda's PE multiple has historically re-rated sharply each time orderbook stepped up materially (3.7x increase FY05–07; 8.4x FY15–16). Current 7x increase from RM4.5bn (2021) to RM32bn supports a comparable re-rating cycle [10].
- CLSA notes **management guides core net profit could double by FY27 from FY24 levels** — ahead of CLSA's own forecast [6]. CLSA's own model embeds a **3-year EPS CAGR of 23.3%** (FY25CL +20.1%, FY26CL +16.3%, FY27CL +31.6%) [8].

### 2. International diversification — premium-valuation justification
- Gamuda has demonstrated it can compete internationally, with overseas wins in Singapore, Australia, Taiwan and the UK. Pipeline includes **Penang LRT Segment 1, Sydney Metro West Line-Wide Systems Package, Xizhi-Donghu additional works in Taiwan, and additional data-centre jobs in Malaysia** [3].
- Recent contract evidence (last 6 months):
  - **Kaohsiung MRT Xiaogang–Linyuan Line RLC02** (May 2026): NTD 26.4bn (≈RM3.3bn) total contract, with Gamuda's 70% share ≈**RM2.31bn** over 7.4 years [16].
  - **Smoky Creek and Guthrie's Gap solar EPC (Australia)** awarded to DT Infrastructure subsidiary: **AUD1.1bn total (≈RM3.12bn)** [17].
  - **Ulu Padas Hydroelectric + floating solar PFI in Sabah**: revised LoN signed, integrated 187.5MW hydro + 150MWac solar project expected to generate **>RM450m/year recurring revenue** post-COD (2030/2031) [15].
- CLSA frames the overseas competitiveness as a **structural valuation premium** versus domestic peers (IJM, SunCon) and against Gamuda's own history [2].

### 3. Data-centre and AI infrastructure tailwind (CLSA's preferred way to play Malaysia DC theme)
- CLSA met one of Malaysia's largest CoLo DC players in June 2025; the operator plans **>800MW capacity by 2028 (from ~300MW today)** and confirmed end-customer demand — especially from Chinese hyperscalers — remains strong [13].
- US-tech investment commitments in Malaysia total **~US$23bn** (Nvidia, Google, AWS, Microsoft, ByteDance, Oracle) over recent 10 months, with Johor emerging as the regional DC hub. CLSA's January 2025 work concluded Malaysian hyperscaler partners (Gamuda, YTL Power) are **largely unaffected** by US AI diffusion export restrictions or DeepSeek-related capex worries.
- DC contract evidence: **Gamuda announced RM1.0bn enabling works for a Negeri Sembilan DC client on 5 May 2025** [12]. SunCon-built RM1.2bn DC contracts for a US tech client validate the pipeline visibility.
- Tender pipeline: government is encouraging local sourcing on DCs, and **CLSA expects more DC tenders to be awarded to Gamuda/IJM through CY25** [12].

### 4. Digitalisation moat
- Gamuda's GDOS (Gamuda Digital Operations System), in-house Chief Digital Officer, partnerships with Autodesk and Google Cloud, GenAI deployment, AI Academy, and autonomous TBM development are cited by CLSA as **a genuine differentiator** in winning and executing international contracts versus peers [3]. Investment thesis: "Historically an engineering leader in Malaysia, Gamuda has been able to make inroads into regional infrastructure projects using an industry leading digitalization investment" [4].

### 5. Valuation still reasonable despite re-rating
- At ~**20x next-FY (Jul 2026CL) PE**, CLSA still views Gamuda as attractive given **potential earnings to double over the next three financial years**. IJM at 18.9x FY26 is the cheapest contractor on CLSA's screen but Gamuda offers a higher-quality growth profile [11].
- Target is set at **23.3x July-2026 PE — pegged to the 3-year EPS CAGR** of 23.3%, consistent with the PEG framework. Multiple is in line with where Gamuda traded during prior orderbook step-ups, so the bull case argues this is **not a stretched re-rating** [10].

### 6. Margin recovery built into the model
- 1QFY25 EBIT margin compressed to 7.4% (vs 8.7% prior-year quarter), but CLSA expects margin recovery as the higher-quality international orderbook converts into billings: **EBIT margin FY24A 5.7% → FY25CL 9.9% → FY27CL 10.4%**, with EBIT growth +82.5% FY25CL [8].

### 7. Diversified profit-pool — not pure construction
- Sum-of-the-parts breakdown (pre-bonus TP RM11): **Construction (PE-based) RM22.6bn / Property (RNAV at 40% discount) RM5.7bn / Hydrodam (Sabah, DCF) RM0.64bn / Water O&M (DCF) RM0.65bn**. Property and utility infrastructure provide recurring/RNAV anchoring against construction-cycle risk.

---

## BEAR CASE

### 1. Margin disappointment — the most credible near-term risk
- **1QFY25 missed**: core net profit RM199.8m was only **18% / 17% of CLSA / consensus full-year estimates** [6]. EBIT margin was **7.4% vs 8.7% YoY and vs CLSA's full-year 9.9% forecast** — i.e., the run-rate is below model assumptions [6].
- CLSA already cut FY25/FY26 net profit forecasts by **22% / 6%** in its December upgrade note to reflect lower construction margins.
- Property margin from Vietnam (Celadon City) is **maturing**, eroding the property segment's contribution.

### 2. Execution risk in new geographies
- CLSA's official risk-section call-out: **"There is execution risk for construction projects in new markets"** [5]. The Australia (Sydney Metro West, solar EPC), Taiwan (MRT), and UK (Winchester House) projects all involve unfamiliar local conditions, labour markets, regulatory regimes, and FX exposure.

### 3. Vietnam property slowdown
- A meaningful chunk of property profits comes from **Hanoi and Ho Chi Minh City** developments. CLSA flags that a **slowing Vietnamese economy could dampen demand for property launches** there [5]. Property segment growth assumptions (CLSA: +9%/+29%/+23% in FY25/26/27) hinge on Vietnam delivery.

### 4. Policy concentration risk in Malaysia
- Heavy reliance on a small number of **large Malaysian government-linked mega-projects** (MRT, LRT, hydro) makes Gamuda vulnerable to **policy reversal, project deferral, or political change** [5]. A change in government priorities (e.g., delays to Penang LRT or MRT3) would materially impair orderbook visibility.

### 5. Working-capital and cash-flow drag
- CLSA's own model shows **negative free cash flow** in FY26CL (-RM912m) and FY27CL (-RM677m) as working capital ballooning to fund the orderbook expansion. **Net debt/equity rises from 39.4% (FY25CL) → 47.7% (FY27CL)**. Operating cash-flow margin turns negative (FY26CL –1.9%, FY27CL –0.4%). The growth story is **cash-consumptive**, not self-funding.

### 6. Valuation full — re-rating may have already happened
- CLSA acknowledges investor pushback: **"there is reluctance to buy the stock because of valuation concerns"** [10]. PE is at historical +1 s.d. levels (~19–20x vs mean of ~14.6x). If orderbook wins disappoint or international margins fall short, the multiple compression could be sharp.
- Contractors as a group have already seen substantial run-ups — CLSA explicitly advises being **"selective on DC plays"** after recent share-price gains, even while preferring Gamuda within the basket [11].

### 7. Digital infrastructure JV scepticism
- CLSA is **not yet convinced the new digital infrastructure unit will be EPS accretive**. The Dagang NeXchange JV (Google Distributed Cloud air-gapped services) and the 20% Cloud Space stake (RM18m) are early-stage. CLSA's view: **"Typically, we do not like it when companies venture into a completely new business expecting to do well immediately"** [9].

### 8. Overseas construction net-profit margins still thin
- Despite scaling overseas, **Q1FY25 overseas net profit margin was only 3.2%** (overseas net profit RM72m) — and has trended down from 3.9% in 3QFY24. Gamuda needs to demonstrate it can **convert international topline into proportionate bottom line** before the "international competitiveness premium" is fully earned.

### 9. Macro/structural DC risks
- CLSA's own data centre channel checks flag **water supply as the binding constraint** on Malaysia DC growth — one operator has resorted to wastewater treatment for cooling. If the water bottleneck materially slows DC build-out, contractor pipelines suffer.
- US AI-diffusion export controls and any future restrictions on Tier-2 country chip flows remain a tail risk for the entire Malaysia DC ecosystem (though CLSA's January 2025 hyperscaler-expert call was reassuring).

---

## Key CLSA Estimates Snapshot

| Year to 31 July | FY23A | FY24A | FY25CL | FY26CL | FY27CL |
|---|---|---|---|---|---|
| Revenue growth YoY | +67.7% | +62.4% | +5.7% | +16.2% | +22.4% |
| EBIT growth YoY | +25.6% | -32.5% | +82.5% | +15.5% | +29.4% |
| Net profit growth | +137.7% | -50.7% | +20.1% | +16.3% | +31.6% |
| EBIT margin | 13.8% | 5.7% | 9.9% | 9.8% | 10.4% |
| ROE | 17.9% | 8.2% | 9.3% | 10.2% | 12.3% |
| Net debt/equity | 34.4% | 44.3% | 39.4% | 45.5% | 47.7% |

Source: CLSA / Gamuda [8]

---

## Bottom Line — Two Things to Watch

1. **Quarterly margin trajectory** — the bull thesis collapses if EBIT margin can't recover from the 7.4% 1QFY25 print back toward the 9.9% full-year forecast. Each margin miss tightens the gap between "PEG at 23.3x" and reality.
2. **DC contract awards** — the next leg of share-price upside requires Gamuda to convert the Malaysian DC pipeline into hard, sizeable awards. The RM1.0bn enabling-works contract (May 2025) is supportive but needs follow-through to validate the RM40–45bn orderbook trajectory.

CLSA's net stance: **HC O-PF**, the conviction signal that the **orderbook step-up + DC tailwind > margin/execution/cash-flow risks**.

---

**Sources**
[1] Gamuda – O-PF (Continuing international wins) — CLSA (3 Dec 2024) — 607946020LinqAlpha.PDF
[2] Gamuda – O-PF (Continuing international wins) — CLSA (3 Dec 2024) — 607946020LinqAlpha.PDF
[3] Gamuda – O-PF (Continuing international wins) — CLSA (3 Dec 2024) — 607946020LinqAlpha.PDF
[4] Gamuda – O-PF (Continuing international wins) — CLSA (3 Dec 2024) — 607946020LinqAlpha.PDF
[5] Gamuda – O-PF (Continuing international wins) — CLSA (3 Dec 2024) — 607946020LinqAlpha.PDF
[6] Gamuda – O-PF (Earnings miss on weaker margins) — CLSA (12 Dec 2024) — 607946624LinqAlpha.PDF
[7] Gamuda – O-PF (Earnings miss on weaker margins) — CLSA (12 Dec 2024) — 607946624LinqAlpha.PDF
[8] Gamuda – O-PF (Earnings miss on weaker margins) — CLSA (12 Dec 2024) — 607946624LinqAlpha.PDF
[9] Gamuda – O-PF (Earnings miss on weaker margins) — CLSA (12 Dec 2024) — 607946624LinqAlpha.PDF
[10] Gamuda – O-PF (Continuing international wins) — CLSA (3 Dec 2024) — 607946020LinqAlpha.PDF
[11] Malaysia Strategy (Data centre channel check) — CLSA (6 Jun 2025) — 607961433LinqAlpha.PDF
[12] Malaysia Strategy (Data centre channel check) — CLSA (6 Jun 2025) — 607961433LinqAlpha.PDF
[13] Malaysia Strategy (Data centre channel check) — CLSA (6 Jun 2025) — 607961433LinqAlpha.PDF
[14] Malaysia Strategy (Data centre channel check) — CLSA (6 Jun 2025) — Gamuda recommendation history — 607961433LinqAlpha.PDF
[15] Gamuda Berhad — Ulu Padas Hydroelectric Project Revised LoN — Bursa announcement (5 May 2026)
[16] Gamuda Berhad — Kaohsiung MRT RLC02 Notice of Award — Bursa announcement (7 May 2026)
[17] Gamuda Berhad — Smoky Creek & Guthrie's Gap Solar EPC Awards — Bursa announcement (19 May 2026)

## Citations

- [15] **Gamuda (LON_Ulu Padas Hydroelectric Project)** · external
- [16] **Gamuda (Notice of Award_Kaohsiung MRT)** · external
- [17] **Gamuda (Smoky Creek Guthrie Gap Solar Station Projects)** · external

