Better structure for Gamuda in Penang reclamation works, says Kenanga

KUALA LUMPUR: There are more positives than negatives for Gamuda Bhd in taking on the role of both developer and contractor in the reclamation works of Island A.

Kenanga Research in a note said it is net positive on the recent announcement as the group can now benefit from upsides in land prices and prodit as an equity partner, while works can be expedited without any concerns over state funding issues.

On a negative note, it said the entire funding needs of the development amounting to RM6bil to RM7bil will be borne by Gamuda despite having two other partners in the SRS Consortium.

With this deal, Gamuda's order book grows by RM5bil, which falls within Kenanga's target replenishment of RM10bil for FY21 and FY22.

The research house kept its "outperform" call on the stock with an unchanged sum-of-parts target price of RM4.17.

It was announced yesterday that the SRS Consortium comprising Gamuda, Ideal Property Development Sdn Bhd and Loh Phoy Yen Holdings Sdn Bhd has formed a 70:30 joint venture with the Penang state government to develop Island A of Penang South Reclamation measuring 2,300 acres.

The consortium was initially supposed to be a project delivery partner, funding RM1.3bil while Penang state came up with RM1.2bil to kick start the reclamation of 800 acres under Phase 1 of the project.

Under the new structure, Gamuda will fund all the reclamation and infraworks of Island A (Phase 1), which is now 1,200 acres.
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