RHB Research has not made any changes to earnings forecasts.
PETALING JAYA: Gamuda Bhd
’s 50:50 joint venture (JV) with Spanish infrastructure specialist Ferrovial Construction is seen as having a better chance of winning the Oven Mountain Pumped Hydro (OMPH) project in New South Wales, Australia after being appointed as the early contract involvement (ECI) partners by Alinta Energy.
Analysts covering Gamuda remained upbeat on the engineering and infrastructure firm’s outlook, with RHB Research maintaining a “buy” call with a sum-of-parts (SOP)-based target price of RM10.52.
It said the JV has a higher success rate to be made the engineering, procurement, construction and commissioning (EPCC) contractor, given its role as an ECI partner based on the company having been awarded the civil works package in a Queensland onshore windfarm project in September after being made an ECI partner earlier in the year.
While noting that no details have been disclosed on the OMPH project contract, RHB Research said the 900 megawatt (MW) project should cost A$1.8bil based on the cost modelling done by the Australian Energy Market Operator, which prices a new hydropower project at A$2mil per MW.
“We expect contractor profit before tax (PBT) margin for the EPCC works of the OMPH project to be between 10% and 20% – higher than the general PBT margin of other infrastructure works (rail and highways),” it added.
EPCC works have been targeted to begin in the fourth quarter of 2025.
“The size of ECI works is estimated to be not more than 2% of the total contract value of the OMPH project,” it said, adding that this would price the ECI portion at A$36mil.
RHB Research has not made any changes to earnings forecasts since the estimated project contract “are within our RM20bil financial year ending July 31, 2025 (FY25) job replenishment assumption.
“We reaffirm our view that Gamuda remains undervalued, trading at 18.3 times FY26 price-earnings (PE) not too far from the 16 to 17 times PE range seen during the 2017 upcycle when its outstanding order book was just RM7.4bil versus about RM31.4bil now,” it said.
CGS International, which has maintained an “add” call with a SOP-based target price of RM10, said in a report that Gamuda would be able to leverage on its mass rapid transit tunnelling experience, as pump hydro projects involves substantial tunnelling and reservoir works.
“Gamuda needs to now clinch an additional RM8.5bil in new wins to achieve a RM35bil order book by end-2024, assuming a burn rate of RM1bil per month. We expect incremental new wins for the rest of 2024 to be from local projects, such as the Penang light rail transit and Sabah water treatment plant, as well as more data centres,” it said.
CIMB Securities, which maintained a “buy” call and a target price of RM10.20, said “the ECI role marks another major breakthrough for Gamuda’s Australian team as it strives to diversify its infrastructure base to include renewable energy (RE) projects to ensure more sustainable job flows over the mid-to-longer term,” it said.
The brokerage firm added the EPCC portion could yield PBT margins of 10% to 20% (versus up to 8% for projects tendered out by conventional means), and potentially more than 20% if it involves equity participation.
“This aligns with Gamuda’s overarching plan to build up its RE asset portfolio to over 800MW over the next few years,” it said.
