Gamuda Berhad’s commitment for RE projects, sustainable townships and maiden inclusion in F4GBM shows that its succession planning is in place and key to long term sustainability.
Commitment to grow its RE exposure
CGS International (CGS) hosted a meeting with Gamuda’s Chief Sustainability Officer (CSO) Ong Jee Lian on 14 Mar 2023. She said Gamuda remains committed to renewable energy (RE) projects with a RM2bn capex budget set aside for the next 5 years.
The plan is to leverage on its 30% stake in ERS Energy Sdn Bhd, one of the largest solar engineering, procurement, construction and commissioning (EPCC) companies in Malaysia.
In Nov 2023, during CGS’s site visit to Gamuda’s operations in Australia, Gamuda mentioned that ERS Energy will be instrumental when bidding for RE projects there, particular pump hydro projects.
In Oct 2023, it signed an agreement to develop a hydro powerplant in Sabah.
Gamuda was added to the FTSE4Good Bursa Malaysia (F4GBM) and FTSE4Good Bursa Malaysia Shariah (F4GBMS) Index for the first time in Dec 2023 with a 2-star rating.
CGS keeps their Add call given its cheap valuation – trading at CY25F P/E of 11x (1 s.d. below mean since 2005) on 3-year EPS CAGR of 14% (FY23-FY26F).
Key downside risks to our Add call were labour issues and higher costs.
Key re-rating catalysts: higher wins and stronger property sales.
Environmental – Sustainable townships going forward Gamuda’s Green Plan 2025 commits the group to circular construction with specific steps to reduce its direct and indirect greenhouse gases intensity by 30% in 2025 and by 45% in 2030 (base year: FY22).
This Plan is based on four pillars. For FY23, Gamuda has achieved a 23% reduction in Scope 1 and 2 emissions with total energy sourced from renewables at 22%.
The other key highlight for Environmental is the move to sustainable townships as reflected in its Silicon Island (SI), Penang project which has committed to 100% RE supply and a 50% reduction in CO2 emissions by 2030.
Social – Emphasis on health, safety and training
A survey done by PwC in Aug 2023 showed that Gamuda’s social spending in the period of 2015-2022 generated an overall Social Return of Investment (SROI) of 3.4. This means that for every RM1, Gamuda allocated to societal programmes, the corresponding return amounted to RM3.40. In 2015-2022, Gamuda spent 75% on training, health and safety.
It also established a Tunnelling Infrastructure Academy in Australia in 2022 which will be used to train its engineers, and launched Malaysia’s first technical and vocational education and training (TVET) course for next-gen Industrial Building Systems (IBS).
Succession planning; a key facet for long-term sustainability
On succession planning, Gamuda’s Group MD Dato Lin is 68 years old and has been MD since 1981. He has been instrumental in leading the group’s business locally and the more recent expansion to Australia.
News reports have quoted him saying that he benefitted from a ‘long runway’ as he became MD at 26 years old. He is now assembling a group of young leaders which will benefit from his experience where they will also have this ‘long runway’.
The MD of Gamuda Engineering is Justin Chin who is 33 years old and was a product of Gamuda’s scholarship programme.
