KUALA LUMPUR: Gamuda Bhd has been in the news for securing billions of ringgit of contracts. In fact, in the financial year ended July 31, 2026 (FY26) alone, the construction group has secured RM36 billion worth of new contracts.
That number has fueled market optimism for Gamuda's share price since March 31. Between then and October 16, Gamuda's share price increased by 28.7 per cent to close at RM4.78 per share.
However, some observers pointed out that the market is too optimistic on Gamuda's earnings prospects. While the group had secured triple the value of construction jobs in FY26 compared with in FY24, its margins have been declining.
It is also worth noting that about a year ago, the market had expected for Gamuda to record about RM1.8 billion of net profits in FY26. On Aug 19, 2025, the counter hit RM5.80 apiece, the highest since the stock was split on Dec 19, 2024.
The counter then went on a prolonged decline to RM3.70 on March 31, some 36.2 per cent lower, as it became clear that Gamuda could not meet the earnings forecast.
This raises the question whether Gamuda can meet the earnings forecast for the financial year ending July 31, 2027 (FY27) of RM1.4 billion, based on the consensus estimates of analysts covering the stock.
"Yes, Gamuda's margins have been declining, and moving forward if there were to be any margin lift, it's not going to be big. Say FY26 margin was five per cent, maybe FY27 only slightly higher at 5.2 per cent," says an analyst with a bank's research outlet.
Gamuda's net profit margins in FY26 was 5.98 per cent, which was the lowest over the last six financial years. In FY21, Gamuda's net profit margins was 17.97 per cent, when the group earned RM632.19 million out of RM3.52 billion revenue.
Except for in FY22 when Gamuda's net margins jumped to 24.21 per cent due to a one-off exceptional gain from the disposal of its highway assets, the rate has been declining year over year.
The declining margin coincides with Gamuda's expansions overseas. In FY21, overseas revenue was RM705.3 million, or 16.4 per cent of total, while net profit was RM97.6 million, making up 19.9 per cent of the total.
In FY26, total overseas revenue stood at RM11.07 billion, or 59.5 per cent of total. However, overseas net profits were only RM514.06 million, or 48.9 per cent of the total, despite contributing the larger portion to total revenue.
This shows that net profit margin of Gamuda's overseas ventures – both in construction and property development – was only 4.64 per cent in FY26. Gamuda's net profit margin for overseas ventures has been declining.
In FY22, Gamuda's overseas ventures returned 13.1 per cent. It then declined to 8.9 per cent in FY23, to 5.2 per cent in FY24 and FY25.
This shows that returns from Gamuda's large overseas ventures are getting thinner by the year.
Meanwhile, the group's orderbooks are heavy on overseas contracts. As of July 2026, Gamuda's unbilled orderbooks from overseas contracts stood at 57 per cent of the total, with Australian contracts making up 37 per cent of the total.
Since July 2026, Gamuda has secured a total RM8.2 billion worth of new contracts from Australia and RM2.7 billion from Taiwan.
In comparison, the group secured a RM1.7 billion hyperscale data centre job in Port Dickson and announced a joint venture with SD Guthrie Bhd and Gentari to develop a 680 MWac hybrid solar photovoltaic project with a battery energy storage system (BESS) in Perak.
These new contracts brought Gamuda's outstanding orderbook to RM62 billion.
"They argue that now the Malaysia orderbook is around 50 per cent vs Australia's which is around 30%. But the reality is the majority of new jobs will still come from Australia, and the margins are lowest among their operating geographical locations," says the analyst.
Beside overseas margins are usually lower than domestic, Gamuda's declining margin is also due to the profit recognition timing. At the moment, the existing contracts in Australia and Taiwan are at the early stage of execution.
An observer puts it that Gamuda is transitioning into heavier execution of the orderbook in FY27.
"As Gamuda's orderbook transitions into heavier execution, over 90 per cent of expected FY27 construction revenue is directly supported by existing contracts, driving projected construction revenue growth of 50 to 60 per cent this year, and a further around 20 per cent in FY28.
"Profitability will be further enhanced by a favourable project execution mix, high-margin property launches, and higher returns from its growing 6GW renewable energy portfolio," says the observer.
If Gamuda's construction revenue grew by 50 to 60 per cent in FY27, this means that it would reach between RM22.3 billion and RM23.8 billion, from RM14.9 billion in FY26. Assuming that net profit margins stays at five per cent, Gamuda could earn RM1.1 billion to RM1.2 billion.
That is not far off from the RM1.4 billion forecast net profit that the market is ascribing on the group. Another RM200 million to RM300 million of net profits could come from its property development segment.
Another risk factor is Gamuda's net gearing, which stood at more than the self-imposed 70 per cent ceiling as of end FY26. Total borrowings reached RM14.1 billion against RM4.7 billion of cash and marketable securities, leaving net debt of RM9.4 billion.
Short-term borrowings more than doubled to RM6.3 billion from a year ago, following land acquisitions in Vietnam and Singapore. Meanwhile, operating cash flow improved to RM808 million from a RM78 million outflow in FY25.
An observer said that Gamuda's rapid orderbook conversion, and bullet payments from the sold-out Eaton Park development in Vietnam, as well as expected cash inflows of RM5 billion over the next two years, will accelerate deleveraging from FY27 onwards.
The question now for Gamuda is execution, whether the group can actually grow its construction revenue by 50 to 60 per cent in FY27, or if the construction margins can start to recover.
In a note published on Sept 29, CGS International stated that Gamuda had raised its construction revenue projections for FY27 to FY28 which assumes a 30 per cent compound annualised growth rate (CAGR).
The 60 per cent year-on-year growth for FY27 assumes largely just its orderbook of RM61 billion, with minimal assumption of new wins. As of September, 91 per cent of the orderbook has yet to reach peak progress.
The orderbook is likely to stay at RM60 billion as of the end of the year, which is 20 per cent above target, said CGI International.
"This, together with better earnings delivery [with earnings per share (EPS) CAGR of 20 per cent between 2026 and 2028], could lead to a sustainable share price re-rating.
"We do not discount upside to FY27 forecast EPS given that three of its projects in New South Wales will be completed earlier than expected, where there is an incentive for early delivery," stated CGS International in the report.
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