---
endpoint: analytics
pattern: Infrastructure
status: done
latency_ms: 220543
conversation_id: cd3ed5e1-e612-46dc-851f-af593a1dcb6d
citations: 13
created: 2026-05-31 22:11:58Z
---

# What is the investment thesis for Gamuda in the current market environment?

# Gamuda Bhd (GAM MK, 5398) — Investment Thesis in the Current Market Environment

> **Vintage note**: CLSA's coverage in this workspace runs through 29 June 2025 (latest matched-set date). All ratings, target prices, and "current" framing below reflect that vintage. No indexed public-company filings/transcripts were returned for ticker 5398, so the thesis below is constructed from CLSA's RMS sell-side coverage.

---

## 1. Headline View

| Metric | Value |
|---|---|
| **Rating** | **HC O-PF** (High-Conviction Outperform) [1] |
| **Target Price** | **RM5.50** [1] |
| **Last Price (9 Jun 2025)** | RM4.70 [1] |
| **Implied Upside** | **+17%** [1] |
| **Market Cap** | US$6.5bn [1] |
| **2025/2026 PE** | 26.1x / 20.1x [1] |
| **2025/2026 EPS growth** | 8.5% / 29.6% [1] |
| **Valuation framework** | PE-to-growth — 23.3x July 2026 PE (= 3-yr net profit CAGR) [7] |

Gamuda is one of CLSA Malaysia's **High-Conviction Outperform** top picks alongside CIMB and YTL Power [1].

---

## 2. The Five-Pillar Thesis

### Pillar 1 — Malaysia data-centre buildout: contractor of choice
CLSA's June 2025 channel check with the country's largest colocation operator (planned 800MW capacity by 2028, vs ~300MW today) confirmed end-customer demand remains strong, with Chinese hyperscaler interest adding to US demand [2]. Gamuda is CLSA's preferred contractor play on this buildout: **"We prefer contractors Gamuda and IJM Corp on the back of this buildout."** [2] Tangible evidence: on **5 May 2025, Gamuda announced RM1.0bn of enabling works for a DC client in Negeri Sembilan** [2].

### Pillar 2 — Partnership with a US hyperscaler insulates the thesis from AI uncertainty
DeepSeek and US AI diffusion rules triggered a sell-off in Malaysian DC-adjacent names (Gamuda -17.5% from YTD peak in Jan 2025) [5]. CLSA's hosted call with a US hyperscaler expert concluded the diffusion rules would NOT derail US hyperscaler plans in Malaysia and that **"the market has overpunished some names in the space"** [6]. **"YTL Power's partnership with Nvidia and Gamuda's with a large US hyperscaler are important investment considerations."** [6]

### Pillar 3 — Diversified, increasingly overseas orderbook
Gamuda has aggressively pivoted toward export work, with Australia emerging as a meaningful new revenue stream:
- **Capricornia Pumped Hydroelectric Storage and Transmission Project** (Queensland): 50:50 JV with Ferrovial Construction signed an Early Contractor Involvement (ECI) deal — proposed 750MW pumped storage facility, budgeted AU$2.87bn (RM7.89bn); construction starts 2026, operations 2031 [7]
- Catalysts: further awards in **Malaysia (data centres, public infrastructure, renewable energy), Taiwan (public infrastructure), and Australia (renewable energy, public infrastructure)** [5]
- CLSA: **"Gamuda's diversified construction portfolio as well as close relationship with a large US hyperscaler suggests strong ability to continue winning jobs overseas, and potential future jobs with the US hyperscalers."** [7]

### Pillar 4 — Orderbook trajectory and earnings can plausibly double by FY27
At the 1QFY25 briefing (Dec 2024), management said **"it would not be surprised if net earnings double by FY27 (from FY24 levels), which is ahead of our forecast"** and continued to guide for an **unbilled construction orderbook of RM40-45bn by end-CY25 (from RM30bn at the time)** [8]. The valuation switch to PE-to-growth reflects this trajectory [7].

### Pillar 5 — Engineering leadership and execution track record
Anchor narrative: **"Historically an engineering leader in Malaysia, Gamuda has been able to make inroads into regional infrastructure projects using an industry leading digitalization investment. It has a strong management team that is recognised for its execution track record, which usually manifests in reasonably strong margins."** [4]

---

## 3. Earnings & Valuation

### Recent Results (1QFY25)
1QFY25 (reported 12 Dec 2024) was a **headline miss** vs CLSA/consensus, but with strong top-line growth and management framing it as a timing issue [8]:

| Metric | 1QFY25 | 1QFY24 | YoY | % of CLSA FY |
|---|---|---|---|---|
| Revenue | RM4,136m | RM2,805m | **+47%** | — |
| Core PATAMI | RM199.8m | RM186.3m | +7% | **18%** (miss) [8][14] |
| Core PATAMI margin | 4.8% | 6.6% | -180bps | — |

The Q-on-Q margin softness was the main concern (construction PATAMI margin 4.6% vs prior periods, property margin compressed from 12.7% to 5.8%) [14]. **Overseas net profit also weakened**: from RM125m / 30% margin (3Q22) to RM25m / 5% margin in 1Q25 [13].

### Why CLSA still rates O-PF / HC O-PF
**"We expect the following quarters to see both bottom-line and margin improvements, as progress in billings from both the construction and property segments continues to drive earnings."** [10] Valuation is anchored on PE-to-growth: 23.3x July 2026 PE = three-year net-profit CAGR of ~23%, with premium-to-history justified by overseas wins [7][11].

### Peer comparison (top picks comp, June 2025)

| Stock | Rating | Price | TP | Upside | 2026 PE | 2026 EPS gr. |
|---|---|---|---|---|---|---|
| **Gamuda** | **HC O-PF** | 4.70 | 5.50 | +17% | 20.1x | +29.6% [1] |
| Tenaga | O-PF | 14.28 | 17.60 | +23% | 15.3x | +1.9% [1] |
| YTL Power | HC O-PF | 3.50 | 4.80 | +37% | 11.8x | -16.8% [1] |
| CIMB | HC O-PF | 6.89 | 8.70 | +26% | 8.8x | +6.8% [1] |

CLSA notes: **"Contractors have seen a run-up recently but we still think Gamuda looks attractive at 20x next FY PE (FYJul26CL) with potential for earnings to double over the next three financial years."** [3]

---

## 4. Optionality — Google Cloud / Digital Infrastructure
A newer (and less proven) leg of the thesis: Gamuda's **JV with Dagang NeXchange (50:50)** to be the sole provider of Google Distributed Cloud air-gapped services in Malaysia, plus a **20% stake in Cloud Space** (the only Google Cloud Premier Partner in Malaysia) — initial outlay ~RM18m [9]. Gamuda gets **first right to collaborate on any new large-scale cloud projects with a minimum 50% equity stake** [9]. CLSA framing is constructive but cautious: **"We are not yet convinced its new digital infrastructure unit will be EPS accretive."** [9]

---

## 5. Risks & Counter-Thesis Signals

| Risk | Detail |
|---|---|
| **Execution risk in new markets** | Construction in Taiwan/Australia/Vietnam is unfamiliar terrain [5] |
| **Vietnam macro** | A slowing Vietnamese economy could dampen demand for Hanoi/HCMC property launches [5] |
| **Policy/concentration risk** | Job concentration in large Malaysian projects exposes Gamuda to policy risk [5] |
| **Margin compression** | 1QFY25 core PATAMI margin fell to 4.8% from 6.6% YoY [14]; overseas margin collapsed to 5% in 1Q25 vs 25-30% in prior years [13] |
| **Consensus EPS revision** | Post-1Q25 results, **Bloomberg consensus FY2025 EPS for Gamuda was cut -11.0%** (the largest cut among top-15 FBMKLCI constituents) [12] |
| **Share-price reaction** | Gamuda's 1-day / 3-day share-price reaction to the May-2025 miss was **+7.7% / +5.2%** — counter-intuitive, suggesting expectations were already low and the orderbook narrative trumped the print [15] |

The –11% consensus EPS cut for FY25 is the single most important friction in the bull case: it signals that the headline 2025 PE (26.1x) is being pushed up not just by FY26 growth optionality but also by near-term downgrades [12]. The investment case therefore rests on **FY26 earnings inflection (+29.6% EPS growth at CLSA estimates [1])** materialising — which itself rests on the DC/overseas orderbook delivering.

---

## 6. Bottom-Line Thesis (in one paragraph)

Gamuda is CLSA's high-conviction way to play three converging Malaysian themes — the hyperscaler-led data-centre buildout, public-infrastructure spending, and Australia/Taiwan export work — through a contractor with proven execution and a credible path to **doubling earnings by FY27** versus FY24 [8]. The stock screens optically expensive on FY25 PE (26x) but reasonable on FY26 PE (~20x) once the orderbook converts; CLSA's PE-to-growth framework at 23.3x July-26 PE delivers a RM5.50 target and ~17% upside from RM4.70 [1][7]. The near-term watch-items are margin recovery from the 1QFY25 trough, conversion of the RM30bn → RM40–45bn orderbook target, and whether US-hyperscaler DC awards keep coming despite AI-diffusion-rule headlines [6][8][2]. The –11% post-1Q25 consensus FY25 EPS cut [12] is the main friction; the +7.7% 1-day share-price reaction to that same miss [15] suggests the market is already discounting it.

---

**Sources**
[1] Malaysia strategy (1Q25 results: outlook not as dire) — CLSA (9 Jun 2025) — top picks comp sheet, Gamuda HC O-PF, TP RM5.50, price RM4.70 — 607961581LinqAlpha.PDF
[2] Malaysia Strategy (Data centre channel check) — CLSA (6 Jun 2025) — RM1.0bn DC enabling works in Negeri Sembilan; contractor preference — 607961433LinqAlpha.PDF
[3] Malaysia Strategy (Data centre channel check) — CLSA (6 Jun 2025) — "Gamuda still attractive at 20x next FY PE" / earnings doubling — 607961433LinqAlpha.PDF
[4] Malaysia strategy (Opportunity in AI DC uncertainty) — CLSA (23 Jan 2025) — Investment thesis — 607948926LinqAlpha.PDF
[5] Malaysia strategy (Opportunity in AI DC uncertainty) — CLSA (23 Jan 2025) — Catalysts, valuation, risks — 607948926LinqAlpha.PDF
[6] Malaysia Strategy (DC slowdown fears overblown) — CLSA (4 Feb 2025) — DeepSeek/diffusion-rule call — 607949656LinqAlpha.PDF
[7] Malaysia Strategy (DC slowdown fears overblown) — CLSA (4 Feb 2025) — Capricornia Pumped Hydro / Ferrovial JV — 607949656LinqAlpha.PDF
[8] Gamuda - O-PF (Earnings miss on weaker margins) — CLSA (12 Dec 2024) — Earnings doubling guidance, RM40-45bn orderbook target — 607946624LinqAlpha.PDF
[9] Gamuda - O-PF (Earnings miss on weaker margins) — CLSA (12 Dec 2024) — DneX JV, Cloud Space stake — 607946624LinqAlpha.PDF
[10] Gamuda - O-PF (Earnings miss on weaker margins) — CLSA (12 Dec 2024) — Orderbook catalyst, RM11.00 TP maintained at the time — 607946624LinqAlpha.PDF
[11] Malaysia Strategy (DC slowdown fears overblown) — CLSA (4 Feb 2025) — Peer table — 607949656LinqAlpha.PDF
[12] Malaysia strategy (1Q25 results) — CLSA (9 Jun 2025) — Gamuda FY25 consensus EPS cut -11.0% — 607961581LinqAlpha.PDF
[13] Gamuda - O-PF (Earnings miss) — CLSA (12 Dec 2024) — Overseas net profit & margin trajectory — 607946624LinqAlpha.PDF
[14] Gamuda - O-PF (Earnings miss) — CLSA (12 Dec 2024) — 1QFY25 results table — 607946624LinqAlpha.PDF
[15] Malaysia strategy (1Q25 results) — CLSA (9 Jun 2025) — Post-results 1-day/3-day share-price reactions — 607961581LinqAlpha.PDF

---

**Follow-up questions you may want to explore:**
1. Want me to pull Gamuda's official Bursa filings / annual report content via a wider TFS search to triangulate the orderbook and segmental numbers?
2. Want a side-by-side of Gamuda vs IJM vs SunCon as Malaysian DC contractor plays (CLSA prefers Gamuda/IJM; SunCon was downgraded to U-PF on 16 Jun 2025)?
3. Want a deeper look at the consensus EPS revision dynamic — i.e., where the cut is concentrated (margins vs volumes) and whether CLSA's FY26 estimates are now above or below Street?

## Citations

- [1] **607961581LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961581LinqAlpha.PDF>
- [2] **607961433LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961433LinqAlpha.PDF>
- [3] **607961433LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961433LinqAlpha.PDF>
- [4] **607948926LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/01/607948926LinqAlpha.PDF>
- [5] **607948926LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/01/607948926LinqAlpha.PDF>
- [6] **607949656LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607949656LinqAlpha.PDF>
- [7] **607949656LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607949656LinqAlpha.PDF>
- [8] **607946624LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/11/607946624LinqAlpha.PDF>
- [9] **607946624LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/11/607946624LinqAlpha.PDF>
- [10] **607946624LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/11/607946624LinqAlpha.PDF>
- [11] **607946624LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/11/607946624LinqAlpha.PDF>
- [12] **607961581LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961581LinqAlpha.PDF>
- [13] **607946624LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/11/607946624LinqAlpha.PDF>

