KEY INVESTMENT HIGHLIGHTS

• Signs acceptance of Ulu Padas Hydro project; pending signing of PPA
• Construction to begin in 2025, taking 6 years; 40 years of PPA to generate recurring income
• Strong order book at RM26.0b; in line to surpass RM30.0b mark by end- 2024
• Maintain BUY with a revised TP of RM8.26

Acceptance of hydro project. Gamuda, through Upper Padas Power Sdn Bhd (UPPSB), has inked the acceptance of a letter of notification (LoN) from the Energy Commission of Sabah (ECoS) for the development of the 187.5MW Ulu Padas Hydroelectric project.

Project details. The project comprises the construction of a dam located in Tenom and Sipitang districts in Sabah, which will deliver an average of 1,052GWh of clean energy annually. This will be developed by UPPSB, which is a wholly-owned unit of UPP Holdings Sdn Bhd. The latter is a JV between Gamuda (45%), Sabah Energy Corporation Sdn Bhd (40%) and Kerjaya Kagum Hitech JV Sdn Bhd (15%). The construction process is expected to be completed within six years, starting in 2025 after UPPSB signs a 40-year power purchase agreement (PPA) with Sabah Electricity Sdn Bhd as the offtaker. In addition, the LoN also requires UPPSB to propose and implement a floating solar solution to be integrated with the project.

40 years of recurring income. Upon the scheduled commercial operating date on or before 31st December 2030, the project is expected to generate an annual revenue higher than RM400m annually, which will provide recurring income for Gamuda over the next 40 years.

Order book on track to record high. Pending finalisation of the PPA, we expect the hydro project to add about RM3.0b to Gamuda's outstanding orderbook. The group's outstanding order book is estimated to be at about RM26.0b. The hydro project and the upcoming Penang LRT will likely boost the amount exceeding RM30.0b by end-2024.

Sungai Rasau incident. At 2pm on Saturday, a collapse of the pond embankment where the Sungai Rasau Water Supply Scheme (Stage 1) project is located resulted in the pond water entering the front area of the construction site. Gamuda has halted ongoing works to evaluate the situation and to implement additional safety protocols. Based on updates from management, the affected area was an ancillary site where the intake structure is being built, which did not affect the main site or the critical path. They guided that the completion date by Jun-25 is still intact, after an initial assessment on the required remedial works. The RM1.97b project was awarded to Gamuda by Pengurusan Air Selangor in Jul-22, which includes the construction of an intake structure of a 1,400m-litre- a-day (MLD) capacity to draw augmented raw water from ex-mining

Source: MIDF Research - 9 Sep 2024