Gamuda set for 40-year income from RM5bil Perak water project
The group, via a joint venture with Perbadanan Kemajuan Negeri Perak (PKNPk), has been tasked by the state government to design, construct and operate water treatment and distribution facilities in Kerian, northern Perak.
The project will supply treated water to the Kerian Integrated Green Industrial Park, with excess channelled to Penang.
This will be done on a privatisation basis whereby the agreement is expected to be finalised in 90 days, in return for a minimum concession period of 40 years. It is expected to be up and running by 2030.
HLIB Research said the formal construction contract is expected to materialise in 2026, with an estimated value of RM4 billion.
The firm said with 50 per cent stakes in the JV, Gamuda's share of investment is estimated to be around RM500 million over the coming years, with negligible impact on the group's net gearing due to its growing equity base.
The group is guiding for pre-tax profit margins of 10–12 per cent for the construction phase.
"Upon completion, this water project will serve as Gamuda's second recurring income source domestically, to be complemented by the Ulu Padas hydro project in Sabah.
"Commercial parameters, including internal rate of return guidance remains fluid but we expect significant recurring earnings contributions to Gamuda.
"We had previously estimated Gamuda's share of profit from its Ulu Padas hydro project at RM70 million annually," HLIB Research added.
HLIB Research made slight upward revisions to Gamuda's earnings forecasts, raising FY26 and FY27 projections by 2.1 per cent and 4.4 per cent, respectively.
The firm maintained its "Buy" call on Gamuda, raising its target price to RM5.70 a share from RM5.50, implying a 10 per cent discount to its sum-of-parts valuation of RM6.34.
"We remain positive on Gamuda's order book trajectory, underpinned by a growing pipeline of shortlisted international projects and an expected domestic data centre construction cycle," it added.
Gamuda currently has an order book of RM37.2 billion and is actively expanding into the Australian renewable energy space, including pumped hydro projects, which HLIB views as a potential catalyst for long-term growth.
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