PETALING JAYA: Gamuda Bhd
’s Sydney Metro West-Western Tunnelling Package (SMW-WTP) project in Australia is making good progress, having achieved a 37% completion rate as at the end of financial year 2023 (FY23).
According to RHB Research, the project is expected to contribute 13% and 10% to Gamuda’s overall earnings in FY24 and FY25, respectively. “We were pleasantly surprised by the progress made at the SMW-WTP project, and the business prospects Australia holds for the group.
“Overall, we still like Gamuda for its diverse geographical base,as well as its increasing focus towards the renewable energy (RE) space,” it said in a report following a recent visit to the SMW-WTP project site.
Future opportunities under the Sydney Metro project include four additional lines, combined with line-widening jobs that might be eyed via Gamuda’s Australian unit, DT Infrastructure (DTI).
Gamuda secured the SMW-WTP in March 2022 for A$2.2bil, to be executed under a consortium with its local delivery partner Laing O’Rourke.
“As at end-July, the SMW-WTP job was 37% completed but we estimate the latest progress at 45% completion.
“In terms of balance of works to be completed, the SMW-WTP project makes up about 14% of the group’s estimated RM26bil order book, after considering the latest job win in Taiwan and the Sabah hydropower plant announced in October,” said RHB Research. The SMW-WTP job is expected to be completed by 2025.
RHB Research said Gamuda would continue to keep an eye on rail and road projects in Australia by leveraging on DTI’s capabilities, backed by an estimated tender book of A$5bil to A$6bil.
“Australia projects currently account for about 42% of the group’s order book, based on our estimates.
“With more emphasis by the Australian government towards RE such as pumped hydro, solar and wind power, Gamuda Engineering Australia is eyeing opportunities in the Tarraleah Power Station in Tasmania.
“Other prospects include engaging directly with RE asset developers via the partnership with ERS Energy by offering an equity plus engineering, procurement, and construction deal – which may provide a recurring income base plus construction order book replenishment,” the research firm added.
Meanwhile, Kenanga Research said concerns about potential cancellation of the SMW-WTP project was cleared on Nov 16 with the project not included in the Australian Infrastructure Minister’s list of 50 infrastructure projects to lose federal funding.
It noted the huge RE prospects in Australia with its government committing an initial public investment of A$40bil for the RE industry, including A$20bil to upgrade the electricity grid.
“Australia is an RE superpower – the world’s sixth largest solar electricity producer in 2021 with three million or 30% of its households powered by rooftop solar photovoltaics.
“It is the world’s No. 2 for solar power potential, given its vast land size and geographical location, and ranked third lowest cost for generating solar power among major solar-power producers.”
Kenanga Research said there are 364 infrastructure projects valued at A$639bil in the pipeline that are yet to be awarded, with more than half coming from the states of New South Wales (NSW) and Victoria.
“Energy-related infrastructure projects are the key expenditure for the next 15 years, followed by rail and road.
“It has been forecast that NSW’s quarterly expenditure will average A$7bil over the next five years, with a forecast to peak at A$24.2bil in the fourth quarter of calendar year 2025 while energy expenditure is expected to peak at A$9.9bil at the same time.”As for Malaysia, Kenanga Research expects a revitalisation of the domestic construction sector in 2024, backed by the rollout of the RM45bil mass rail transit three project, RM9.5bil Bayan Lepas light rail transit and six flood mitigation projects reportedly worth RM13bil.
According to the research firm, Gamuda has guided for RM25bil new contracts over FY24 and FY25, including six big-ticket projects by April 2025.
Kenanga Research has a RM5.45 target price (TP) on the stock, while RHB Research upped its TP to RM5.41 from RM5.31, which translated to a 16% upside and about 3% FY24 yield.
