New Projects Unlocking Major Opportunities
Gamuda Bhd’s renewable energy and water projects are set to unlock a significant pipeline of new business, with RHB Investment Bank Bhd estimating over RM6 billion in EPCC (engineering, procurement, construction, and commissioning) opportunities. Key projects identified as catalysts for this growth include the Ulu Padas Hydroelectric Dam (UPH) and the North Perak Water Supply Scheme (NPWSS). In addition to the immense EPCC value, these projects are also projected to generate a substantial combined annual recurring income of at least RM50 million, providing a stable and long-term revenue stream for the company. This forecast reinforces the company’s strategic shift towards high-value, long-term infrastructure projects in key growth sectors, positioning it favorably in the market.
Strong Buy Recommendation and Valuation
RHB Investment Bank remains bullish on Gamuda, maintaining its “Buy” recommendation on the stock. The research house’s positive outlook is driven by Gamuda’s diverse portfolio, which spans various geographical regions and encompasses a wide range of projects. The company is actively pursuing tenders for renewable energy, railway projects, data centers, and water infrastructure, showcasing its adaptability and strong market presence. The bank kept its earnings forecasts unchanged but incorporated the long-term value of the UPH and NPWSS projects into its valuation, using a discounted cash flow (DCF) method. This analysis included specific assumptions, such as a tariff of 31.5 sen per kilowatt hour for the UPH and a blended water tariff of MYR1.48 per cubic meter for the NPWSS, further justifying its confidence in Gamuda’s future earnings potential.
Raised Price Target Reflects Unique Market Position
Following its detailed analysis, RHB Investment Bank raised its target price for Gamuda from RM5.86 to a more optimistic RM6.52. The bank’s decision to increase the target price is based on its view that Gamuda’s shares should trade at a premium to its current valuation. The research house has assigned a higher target price-to-earnings (P/E) ratio for both the overseas and domestic construction segments, recognizing the company’s unique advantages. These include ample opportunities in the renewable energy sector in Australia and a strong domestic presence in water and hydropower projects, which many of its key competitors lack. This raised target price reflects the bank’s strong belief that Gamuda’s strategic focus on these specialized sectors will deliver significant value to shareholders moving forward.
