Construction giant Gamuda is purchasing a 30% stake in ERS Energy Sdn Bhd, a solar energy engineering, procurement, construction, and commissioning (EPCC) firm, will mark its entry into green infrastructure, in a bid to rebuild its recurring income after exiting the toll business.
ERS is currently a JV partner of Gamuda via NEDA Pekan Sdn Bhd to develop a 39MW solar power plant under the New Enhanced Dispatch Arrangement (NEDA) framework, which allows power producers to supply energy to Single Buyer, without having to enter into a power purchase agreement (PPA). Post-acquisition, Gamuda will effectively hold 64% of NEDA Pekan entities. MIDF believes there could be more acquisitions or partnerships in the green energy space as it focuses on securing renewable energy concessions that offer strong cash flows with a healthy internal rate of returns (IRRs).
The restructuring of the four major highway concessions – Kesas, Sprint, Litrak, and Smart– was completed on Oct 13 which saw all four entities fully acquired by Amanat Lebuhraya Rakyat (ALR), marking Gamuda’s exit from the toll concession business. The group announced its special dividend of 38 sen per share last month. The exdate is on Dec 13 while the payment date is on Dec 23.
Gamuda remains our top pick for the construction sector, premised on its effective diversification strategy out of Malaysia in a bid to become a strong regional player. This also shields them from being too overly exposed to the ups and downs of the construction sector cycle in Malaysia, of which the rollout of mega infrastructure projects remains obscure for now with potential delays or terminations. While MIDF does not expect the MRT3 to be terminated as it is a crucial line to complete the rail network in the Klang Valley, it does not discount the possibility of a delay that could possibly come from reviews or revisions.
The contruction giant is among the favourites to secure package CMC303 with its partner MMC, which it estimates to be RM16.3b. With a record-high outstanding order book of RM15b, there is strong earnings visibility up to FY26.
