Gamuda gets robust valuations following new RM3 billion hydro project in Sabah

KUCHING (Oct 29): Industry analysts have elected to maintain a ‘buy’ call and robust valuations on Gamuda Bhd (Gamuda) following the announcement that the construction player has secured a RM3.05 billion contract for a hydroelectric project in Sabah.

In a filing with Bursa Malaysia on October 25, Gamuda said that a joint venture (JV) between it and Conlay Construction Sdn Bhd (Conlay) have been appointed as a total developer contractor by Upper Padas Power for the 187.5MW Upper Padas Hydroelectric (UPH) project in Sabah.

Gamuda is expected to assume a 75 per cent stake in the unincorporated JV which would make its share of the contract worth an estimated RM2.3 billion.

The contract involves the design, construction, testing and commissioning of the 187.5MW hydroelectric plant that involves a roller-compacted concrete damn, main and secondary power houses, a water conveyance system, project access, and other permanent facilities.

This also includes a 275kV switchyard and a 33kV sub-transmission line, a workshop, stores, operation facilities, and a residential village.

The tenure of the project is six years and the UPH project is scheduled to begin commercial operation on or before Dec 31, 2030.

Assuming a profit before tax (PBT) margin or 10 per cent, this UPH project is anticipated to generate Gamuda a net profit of around RM173.7 million throughout the construction period.

Additionally, the power plant is expected to generate Gamuda a revenue exceeding Rm400 million per annum which will turn into a long-term recurring income for the group considering that there is a 40-year power purchase agreement with Sabah Electricity Sdn Bhd as the off-taker.

Overall, analysts were positive on the new win as it brought Gamuda’s outstanding construction orderbook to RM31 billion, which is close to potentially exceeding its RM35 billion orderbook target by the end of 2025.

According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), the potential win to getting Gamuda to surpass its own orderbook target will come from the Penang LRT contract which is estimated to be worth RM4.56 billion based on Gamuda’s 60 per cent stake in the SRS Consortium, hyperscale data centre projects worth circa RM3 billion, and renewable energy projects in Australia.

“Gamuda is also in the midst of tendering for the line wide package for the Suburban Rail Loop (SRL) in Melbourne and several packages under the Sydney Metro West project.

“Management expects the order book to grow to RM40 billion to RM45 billion by 2025, after taking into account an estimated burn rate of RM12 billion to RM13 billion annually,” the research arm shared.