GAMUDA has won Package 1 of Rasau Water Supply Scheme (Phase 1) worth RM1.97bn. Post win, YTD replenishment stands at RM11.7bn. This contract is expected to deliver PBT margins of 8-10% and will span 35.5 months with completion slated in June 2025. BUY with TP of RM4.20 anchored on: (i) 18x construction PER – a premium to contractor’s average of 11x (ii) a 60% discount to properties’ RNAV and (iii) buyout price offered by Amanat Lebuhraya Rakyat Bhd (ALR) for its toll concessions.

GAMUDA has secured a contract from Air Selangor as the main contractor for Package 1 of the Rasau Water Supply Scheme (Phase 1). This contract entails: (i) an intake structure with 1,400MLD water drawing capacity, (ii) raw water pumping mains/pipeline, (iii) a 700MLD water treatment plant and its associated works. The project will span 35.5 months with tentative completion target in June 2025. Note that Package 2 and 3 (for Phase 1) of the Rasau Water Supply Scheme which comprises of pipelines and reservoir for treated water was already awarded back in December 2021 to Taliworks.

This new scheme will draw its raw water from Sungai Klang allowing for an alternative water source (in case Sungai Selangor gets polluted) and increase the water reserve margins within Klang. With the new Rasau Water Supply Scheme (Phase 1), the water reserve margin at Klang will rise to 20.9% by 2025 (vs 1.9% without it).

Upon completion, Air Selangor would continue with Phase 2 which entails another 700MLD water treatment plant and its associated network of distribution pipelines. Should GAMUDA successfully execute the design and construction of this first water treatment plant, we believe they would stand a strong chance to secure the second as well.

With this RM1.97bn win, GAMUDA’s FY22 YTD replenishment stands at RM11.7bn pushing outstanding order book to RM14.4b. GAMUDA guides that the PBT margins for this project will range between 8 to 10% - similar to their historical construction PBT margins registered between FY18- FY21. Margins for this contract are relatively protected by price escalation clauses built in for key raw materials.

Source: Rakuten Research - 4 Jul 2022