UPHP Project Secured at Finalised Value of RM3bn

GAMUDA has secured the Ulu Padas Hydroelectric Plant (UPHP) project, valued at RM3bn after excluding the interest cost, from Upper Padas Power Sdn Bhd (UPPSB) through its unincorporated joint venture (JV) partnership with Conlay Construction Sdn Bhd (Conlay), in a 75%:25% partnership. Notably, Conlay, a Malaysia-based construction and property firm with extensive track record in infrastructure, residential, and commercial construction.

As the Total Development Contractor for UPHP project, GAMUDA’s scope includes the design, construction, testing, and commissioning of a 187.5MW hydroelectric plant. This project encompasses a roller-compacted concrete dam, primary and secondary powerhouses, a water conveyance system, and access infrastructure. It also includes permanent facilities such as a 275kV switchyard, a 33kV sub-transmission line, a workshop, storage and operational facilities, and a residential village.

To recap, UPPSB was established on 30 October 2023 as a JV between GAMUDA, Sabah Energy Corporation Sdn Bhd, and Kerjaya Kagum Hitech JV Sdn Bhd, holding stakes of 45%, 40%, and 15%, respectively. This JV was formed specifically to execute the UPHP as a private finance initiative.

The UPHP project is projected to generate RM2.3bn in revenue attributable to GAMUDA, with commercial operations scheduled by 31 December 2030.

Our Views

This marks GAMUDA’s third new project award for FY25, bringing total new contracts to RM15.5bn since FY24 – see Exhibit 2, which is 62% of the group’s internal new job replenishment target of RM25bn for FY24-25. Consequently, GAMUDA’s unbilled order book has grown to approximately RM31bn, representing 2.9x the FY24 construction revenue.

Assuming a PBT margin of 10% as per management guidance, this UPHP project is anticipated to generate a net profit of around RM173.7mn throughout the construction period.

Looking forward, we expect the UPHP project to significantly bolster GAMUDA’s order book, driven by the potential rollout of the Upper Padas water supply scheme (c.RM3~4bn) and the integration of floating solar solutions into the project. Furthermore, GAMUDA is poised to surpass its FY24-25 new job replenishment target of RM25bn, with the anticipated finalisation of the Penang LRT project (c.RM6~7bn), two data centre projects and further renewable energy ventures. Additionally, possible new infrastructure projects in Australia could further reinforce GAMUDA’s order book growth, ensuring a stable earnings outlook over the next five years.

Impacts

No changes to our earnings estimates, as the new job win falls within our FY25 new job replenishment assumption of RM20bn.

Valuation

We maintain our SOP-derived target price of RM10.98, inclusive of a 3% ESG premium based on our 4-star rating. With the potential inclusion of GAMUDA in the KLCI index, it presents a good buying opportunity given its emerging value. Maintain Buy call on the stock.

Source: TA Research - 28 Oct 2024