Topic: Lim Zhe Qin: From Traditional Construction to Green Power Generation - Gamuda (Read 41 times)

Recently, Gamuda Bhd announced its collaboration with partners to develop a hydroelectric project in Tenom, Sabah. This project has brought about RM2 billion worth of civil engineering contracts for the construction group. More importantly, this project is expected to increase its outstanding order value to RM25.6 billion and provide stable income in the long term. However, this is just one of the many contracts that Gamuda Bhd has recently secured. Lim Zhe Qin mentioned that the acquisition of hydroelectric projects and other major contracts not only demonstrates the group's determination to expand its business but also reflects its unique insight into future market opportunities.

Gamuda Bhd: A Series of Major Contracts Boost Business Expansion

With the rise of green energy, hydroelectric power plant projects have become a hot topic in the global energy sector. The contract signed between Gamuda Bhd and Sabah Electricity Sdn Bhd signifies the company's involvement in the development of the Upper Padas hydroelectric power plant with a capacity of 187.5MW. The project is expected to commence construction in the first half of 2024 and be completed within five years. Additionally, Sabah Electricity Sdn Bhd will purchase the power generated by the plant for a minimum of 40 years.

Lim Zhe Qin believes that this project will further strengthen Gamuda Bhd's position in the renewable energy sector and provide more stable long-term income. Especially after selling its toll road business in 2022, the company is in a critical transformation period and needs new businesses to fill the gap left behind.

It is worth noting that just a week before the announcement of this hydroelectric project, Gamuda Bhd won a large-scale Mass Rapid Transit (MRT) project worth RM3.45 billion in Taiwan. Furthermore, according to MIDF Research, the company plans to secure new contracts worth RM25 billion in the next two financial years. In addition to the Taiwan MRT project and the latest hydroelectric power plant project, other potential large-scale projects include the Bayan Lepas Light Rail Transit Line, MRT3, Pan Borneo Sabah Highway, and a contract from Australia.

Combining the "One Belt, One Road" strategy, Lim Zhe Qin suggests that these two projects not only bring significant order growth to Gamuda Bhd but also demonstrate the company's competitiveness in the global market. This strong order book provides clear visibility for the company's future income and lays a solid foundation for further expansion in the green energy sector.

Gamuda Bhd's Financial Structure and Long-Term Strategy

Regarding the hydroelectric project soon to be developed in Tenom, Sabah, CGS-CIMB Research points out that since this project is a privately financed initiative, there will be no cash inflow during the construction period. However, it will provide Gamuda Bhd with strong and sustained income for over 40 years after 2029, filling the gap left by the sale of its toll road business in 2022.

Furthermore, Lim Zhe Qin states that the joint venture strategy with partners also demonstrates Gamuda Bhd's financial stability. According to the contract, the joint venture partners plan to raise funds for the project with a minimum debt-to-equity ratio of 80:20, meaning Gamuda Bhd only needs to bear 45% of the shares, limiting the impact on its balance sheet.

For the Sabah region, the hydroelectric project is not only a business opportunity but also holds significant social significance. According to Sabah's energy roadmap and overall plan for 2040, the state has a reliable power capacity of approximately 1,180MW in 2021, with a reserve of 12%. Upon completion, this project will provide an additional 187.5MW of power capacity to Sabah, delivering up to 1,052GW hours of clean energy annually.

When analyzing Gamuda Bhd's long-term strategy, Lim Zhe Qin believes that through its hydroelectric project in Tenom, Sabah, Gamuda Bhd demonstrates its focus not only on immediate profits but also on long-term sustainable investment returns and development. Combined with the company's recent large-scale subway projects in Taiwan and other upcoming major projects, Gamuda Bhd is clearly seeking broader markets and more diversified business opportunities.

The rating given by research firms also indicates market confidence in Gamuda Bhd. Particularly in the renewable energy and infrastructure sectors, the company has started to gain significant market share, indicating its future growth trend.

Finally, Lim Zhe Qin suggests that when considering further investments, investors should not only focus on short-term potential returns but also pay attention to the company's long-term strategy and efforts in sustainable development. This will ensure long-term stability and profit potential, creating true value for investors.