Kenanga Research noted the new project marked Gamuda’s second new long-term recurring income project in Malaysia following the upper Padas hydropower project in Sabah.
PETALING JAYA: Gamuda Bhd
’s planned 40-year water concession in Kerian, Perak, which includes supplying treated water to Penang, highlights the builder’s efforts to grow recurring-income assets, says an analyst.
Tradeview Capital fund manager Neoh Jia Man said the project represented a “huge deal” for Gamuda and was earlier projected to account for around 10% of the group’s financial year 2026 (FY26) order book target.
“That said, it is not expected to be a major setback for Gamuda if the project does not materialise, although that is unlikely given it is already in the final stage,” he told StarBiz.
In a filing with Bursa Malaysia, Gamuda announced that the Perbadanan Kemajuan Negeri Perak and Gamuda joint venture (PKNPk-Gamuda JV) along with Perbadanan Bekalan Air Pulau Pinang Sdn Bhd have signed a memorandum of understanding (MoU) for the sale of excess treated water from the Northern Perak Water Supply Scheme (NPWSS) to Penang.
The broader NPWSS, valued at about RM5bil, is a strategic project to transfer 1,500 million litres per day of raw water from Sungai Perak to the Bukit Merah Dam, to meet demands for irrigation, domestic and industrial use, including the upcoming Kerian Integrated Green Industrial Park (Kigip).
Construction of the project is scheduled for completion by 2030.
In a statement, Perak Mentri Besar Datuk Seri Saarani Mohamad said the project was aligned with the new public investment strategy under Budget 2026.
“Through this alignment on the key commercial terms, we have a commercially viable project that can be flexibly funded via federal financing or a public private partnership arrangement,” he said.
Gamuda had, in July, announced that its 50:50 JV with PKNPk had been appointed by the Perak state government to develop and operate the water treatment and distribution infrastructure in Kerian, under which treated water will be supplied to Kigip and excess treated water sold to Penang.
“The project is not a simple engineering, procurement, construction and commissioning contract (EPCC). It makes sense that more time is needed to finalise the JV structure – hence the signing of the MoU yesterday, following the initial appointment in July.
“The MoU also means that there is the possibility that some of the earlier terms could see variations in the final agreement,” Neoh said.
In July, Kenanga Research said Gamuda was likely to secure the EPCC contract, estimated at RM4bil to RM4.5bil, with a pre-tax margin of 10% to 12%, notably higher than its typical guided margin of 8%.
The research house noted the new project marked Gamuda’s second new long-term recurring income project in Malaysia following the upper Padas hydropower project in Sabah.
Kenanga Research had also assumed a project internal rate of return of 10% with an 80:20 debt to equity structure, implying a weighted average cost of capital of 7.2%. This translated to a sum of parts value of 16 sen for Gamuda’s 50% equity stake.
The project is important to address Penang’s projected deficit, as per the report published by the Natural Resources and Environmental Sustainability Ministry in 2022.
Penang Chief Minister Chow Kon Yeow said the project represented “a vital breakthrough for Penang’s water security” and enabled Penang to have “increased diversification of its water supply sources and a reduced reliance on Sungai Muda”.
Penang’s dependence on Sungai Muda, which forms the natural border between Kedah and Penang’s Seberang Prai, as its main source of raw water has long been a bone of contention between the state and Kedah, as the latter argued that Penang should pay for drawing water that originates from Kedah’s Ulu Muda catchment.
Kedah had threatened to proceed with upstream water-retention projects such as the Takungan Air Pinggiran Sungai scheme, which Penang warned could threaten its water supply and even prompted it to consider legal action.
Penang draws more than 80% of its raw water supply from Sungai Muda.
Neoh said while there are ongoing calls by state governments to upgrade ageing water infrastructure like water pipes, Gamuda is likely to remain selective in its participation.
