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RAM Ratings reaffirms Gamuda’s AA3/Stable/P1 issue ratings

Published on 17 Mar 2023.

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RAM Ratings has reaffirmed the ratings of debt programmes under Gamuda Berhad (Gamuda or the Group) and its subsidiaries, Bandar Serai Development Sdn Bhd and Gamuda Land (T12) Sdn Bhd. The debt facilities of the subsidiaries are irrevocably and unconditionally guaranteed by the Group.

The reaffirmation of the ratings is supported by Gamuda’s better than expected performance and a resurgence in construction jobs. The Group’s RM14.80 bil construction order book and RM5.80 bil of unbilled property sales as at end-October 2022 (end-July 2021: RM4.55 bil and RM4.60 bil, respectively) provides robust earnings outlook for the medium term despite the loss of stable highway concession income. The construction order book is estimated to have ballooned to more than RM16 bil currently and is seen to expand further.

Gamuda enters a new growth phase, supported by a strong balance sheet. Total debts of RM5.01 bil and a cash balance of RM4.74 bil (including investment securities) as at end-October 2022 translate into an improved net gearing of 0.02 times (not including incorporated joint ventures) (end-July 2022 debts, cash and net gearing: RM4.79 bil, RM3.50 bil and 0.13 times, respectively). The Group’s substantial cash hoard will lessen the need for new debts. Balance sheet strength over the next three years is anticipated to be adequate, with gearing and net gearing rising to about 0.6 times and 0.5 times, respectively. Funds from operations net debt coverage is expected to weaken to about 0.20 times from 0.48 times in fiscal 2022. These ratios approximate pre-pandemic levels. 

Fast-paced expansion into multiple countries, particularly maiden and large construction projects in Australia, heighten Gamuda’s execution risks. To minimise these risks, the Group transferred key management and a substantial number of technical staff to the country well before securing its first contract. Given its focus on large-scale infrastructure jobs, Gamuda is susceptible to earnings volatility stemming from a lumpy order book.

 

Analytical contacts
Ben Inn
(603) 3385 2510
ben@ram.com.my

Thong Mun Wai
(603) 3385 2522
munwai@ram.com.my

 

The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2023 by RAM Rating Services Berhad



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