Gamuda has secured an RM3.0bn contract for a hydroelectric project in Sabah with its partner, Conlay Construction SB (Conlay). The joint venture (JV) between Gamuda (75%) and Conlay (25%) was appointed as the development contractor for the Ulu Padas Hydroelectric Power Plant in Sabah. Based on Gamuda’s stake in the JV, the contract value attributable to Gamuda is RM2.3bn. With this new contract, the Group’s outstanding orderbook is now estimated at RM31.0bn. While we view the contract win positively, we are keeping our forecasts unchanged as this makes up part our order book replenishment assumption of 16bn. We maintain our Outperform rating on Gamuda, with unchanged SOTP-based TP of RM9.20.

• Project details. In Oct 2023, Gamuda entered into a joint venture agreement (JVA) with Sabah Energy Corporation SB and Kerjaya Kagum Hitech JV SB on a 45:40:15 ratio to form UPP Holdings for the development and operation of the Upper Padas Hydroelectric Power Plant in Sabah. Upon completion, the plant is expected to deliver an average of 1,052GWh of clean energy per annum, increasing Sabah’s current dependable capacity by approximately 15%. We estimate that it could contribute recurring income of approximately RM60m per annum to Gamuda during the concession period, assuming 31 sen/kWh tariff, 64% effective power generation per annum and funding structured with 80% debt and 20% equity.

• The scope of work includes the design, construction, testing and commissioning of a 187.5MW hydroelectric plant involving a roller- compacted concrete dam, a main and secondary powerhouse, water conveyance system, project access, and other permanent facilities which include a 275kV switchyard, 33kV sub-transmission line, workshop, stores and operation facilities, and a residential village. Work is expected to begin immediately, with a scheduled commercial operation date to be on or before 31 Dec 2030.

• Financial. The Group’s unbilled order book has increased by 7.8% to approximately RM31bn. Assuming a low teen margin and a corporate tax rate of 24%, this project is expected to contribute about 1.7% to net profit annually, based on certain levels of work completion each year over the project’s 6-year duration. However, we make no adjustments to our earnings estimates, as this is factored into our RM16bn order book replenishment assumption for FY25.

Source: PublicInvest Research - 28 Oct 2024