• Gamuda announced the finalisation of RM3bn Sabah Upper Padas hydroelectric power plant project

• This brings the latest order book to c.RM31bn, which remain on track to achieve its order book guidance of RM30-35bn by end24

• Maintain BUY rating and SOP-derived target price of RM9.20

Finalise of the Sabah Upper Padas hydroelectric project

Gamuda has finalised the construction contract for the 187.5MW Sabah Upper Padas hydroelectric power plant project with its JV partner, Conlay Construction, with Gamuda holding a 75% stake in the JV and Conlay Construction holding the remaining 25%. Gamuda has an effective 45% stake in the Sabah Padas hydro project, while Sabah Energy and Kerjaya Kagum Hitech (Conlay) hold 40% and 15% stakes, respectively. The scope of work includes the design, construction, testing, and commissioning of a hydroelectric plant involving a roller-compacted concrete dam, a main and secondary powerhouse, a water conveyance system, project access, and other facilities such as a 275kV switchyard and 33kV sub- transmission line. The project, estimated at RM3bn, will have a 6-year construction period and scheduled commercial operation in Dec30.

Two bites of the cherry

YTD's new contract wins of RM6bn bring Gamuda’s estimated orderbook to c.RM31bn, and we believe is on track to meet management’s guidance of RM30-35bn by end24. We estimate project PBT margins to be 10%, which is in line with the margins from other local projects, translating to c.RM230m PBT over the construction period. We are optimistic about this project, which will provide two revenue streams for Gamuda, as a contractor and recurring income as a project owner. While the tariff rate is yet to be disclosed, we expect this Sabah hydro project to generate RM400–500m annual revenue over its 40-year concession period. Other near-term local replenishment prospects include the Penang LRT (c.RM5bn), Sabah water treatment project, and potential data center projects (c.RM1bn each), potentially further boosting the order book.

Reiterate BUY with SOP-derived TP of RM9.20

We make no changes to our earnings forecast, BUY rating, and SOP-derived target price at RM9.20. Key risks to our BUY call include slower work progress, weaker-than-expected property sales, and project cost overrun.

Source: Philip Capital Research - 28 Oct 2024