Revenue from three projects to lift GDB earnings in FY25
Apex Securities Research recently initiated coverage on the stock with a 'buy' recommendation and target price of 58 sen, an eight times price-earnings multiple to the group's forecast FY26 earnings-per-share of 7.2 sen.
The research house is projecting core earnings excluding one-off items for GDB to grow to RM86.9mil in FY25 and RM67.3mil in FY26, primarily driven by three ongoing major projects entering their peak revenue recognition phases.
Revenue could hit a new record high of nearly RM800mil this year from work on Metrohub 4 in Klang, Logistics Hub Plot B in Shah Alam, and KL International Hospital in Bukit Jalil out of total jobs on hand worth RM1.2bil, according to the research house.
It also said that the company's tender book would reach RM5bil by year-end from the current RM2.7bil, comprising primarily warehouses (44.7%), residential (16.6%), commercial (12.6%), and mixed-use (26.1%) projects.
GDB aims to tender for another RM2bil of projects with a similar concentration mix in warehouses.
The research house pointed out that GDB 'is increasingly carving out a niche in warehouse construction, with two of its three ongoing projects being warehouse related'.
While margins for warehouse projects are broadly comparable with residential and mixed-use projects, the company favours warehouses for their simpler design, faster turnaround and low execution risk.
'This focus strengthens its position to tap into rising demand from Malaysia's logistics and eCommerce sectors,' the research house said, adding that a 15% success rate on upcoming bids translates to potential job wins of at least RM700mil, or two sizeable contracts based on warehouse projects valued at RM300mil to RM500mil each.
Over the longer term, the company has plans to expand into infrastructure construction, particularly in roads, highways, and bridges, which aligns with Malaysia's ongoing economic development.
GDB has temporarily excluded data centres from its plans due to the tight delivery timelines and delay risks, with its management preferring to focus on projects with a more manageable risk profiles, where it can deploy its resources and expertise more effectively.
The group is principally involved in the provision of construction services, focusing on high-rise residential, commercial and mixed development projects as main contractor and principal works contractor.
The stock is currently trading at just four times its estimated earnings for this year, which offers compelling upside over the next two years, the research house said.
At its target price, the company would be valued at eight times next year's projected earnings, and still at a 29% discount to its peers' weighted average, the research house added.
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