Kenanga Research estimated the project with Gentari could yield an annual profit after tax of RM217.2mil for Gamuda from 2029 onwards.
PETALING JAYA: Gamuda Bhd
’s utility businesses will churn out recurring income streams that its toll road concession business used to provide before its sale in 2022.
Analysts view its latest solar initiative, a joint venture (JV) with Gentari Renewables Sdn Bhd to develop 1.5GW of solar photovoltaic power plants paired with battery energy storage systems, as reinforcing the group’s strategic push into the sector.
The Gentari deal is similar to its partnership with SD Guthrie Bhd for a 1.2GW solar facility, with the solar energy projects undertaken under the goverment’s Corporate Renewable Energy Supply Scheme (CRESS) initiative.
What Gamuda will gain from the ventures is unclear as both deals are at the initial stages, with little disclosed about equity stakes, project details, capital structure and sharing arrangements.
Nevertheless, MBSB Research said, assuming an equal split of 750MW of solar and 750MW for storage systems, the total engineering, procurement, construction and commissioning (EPCC) scope of work for Gamuda may come up to between RM3bil and RM3.75bil.
“While no timelines have been shared yet, we believe EPCC work may commence next year with the commercial operation date expected by 2028 or 2029,” the research house said its latest report on Gamuda.
The Gentari venture marks Gamuda’s fifth upcoming project with recurring income, it added.
CGS International Research (CGSI Research) said Gamuda will likely undertake the EPCC work for both deals with potential recurring income and internal rate of returns higher than existing Large Scale Solar (LSS) projects.
“In our view, the ability to secure quality offtakers is key,” CGSI Research said. Gamuda, in its press release about the project, stated the 1.5GW generation capacity is intended to meet the energy demands of strategic hyperscale data centres.
Kenanga Research estimated the project with Gentari could yield an annual profit after tax of RM217.2mil for Gamuda from 2029 onwards.
“The net present value could come up to RM721.3mil at an implied internal rate of return of 8%. Under a 50:50 structure, Gamuda’s share would amount to RM360.7mil or six sen per share to its revalued net asset value,” the research house said.
Analysts also see Gamuda’s latest contract win to build a highway in Sarawak as bolstering its order book that now stands at RM37.7bil.
Gamuda will hold a 30% stake in the JV that clinched the RM1.13bil contract for the Limbang Work Package Section 1 of the Northern Coastal Highway from the Regional Corridor Development Authority.
The scope of work includes 4.7km of a four-lane dual carriageway, bridges, flyovers, earthworks and associated works, to be completed over 48 months.
MBSB Research estimated Gamuda will recognise RM500mil construction revenue on th project and a pretax profit margin of 8%.
The win takes Gamuda closer to its order book target of between RM40bil and RM45bil by the end of this year.
The group expects results from five to seven data centre tender bids over the next three months and it is also bidding for the Penang LRT Package 3 among other bids.
MBSB Research has maintained its “buy” rating on Gamuda with an unchanged target price of RM6.35 a share.
Kenanga Research has an “outperform” call on the company with a target price of RM6.10 a share, while CGSI Research has a target price of RM7.30 and an “add” call.
