KUALA LUMPUR (Sept 9): Shares of Gamuda Bhd (KL:GAMUDA) fell as much as 4.32% in the morning session on Monday, on news of an embankment collapse at its construction site for the Sungai Rasau Water Supply Scheme (Stage 1) project at Taman Mas, Puchong.
The counter fell as much as 32 sen to touch a low of RM7.09, before recouping some losses to trade at RM7.25, still down 16 sen or 2.16%, ahead of the Bursa Malaysia Construction Index's 1.53% decline.
In a statement on Saturday, Gamuda said in a statement said all parties at the construction site were working closely with local authorities and experts to investigate the cause of the incident and determine the appropriate course of action.
No injury was sustained by the construction workers in the incident, the company said.
Gamuda is undertaking the RM1.96 billion construction project to develop a water treatment plant and associated works from Pengurusan Air Selangor Sdn Bhd, with completion expected in June 2025.
In a research report, MIDF Research said Gamuda had guided that “the completion date by June 2025 is still intact after an initial assessment of the required remedial works”.
“Gamuda has halted ongoing works to evaluate the situation, and to implement additional safety protocols,” MIDF Research said.
“The completion progress as at July 2024 was 28%,” said MIDF Research, who raised its target price (TP) to RM8.26 from RM7.50, as it rolled over its valuation to reflect earnings for the financial year ending July 31, 2026 (FY2026).
Maybank Research in a separate note explained that the affected area is the ancillary site, namely the intake structure, and not the main site, or on a critical path.
“We do however think that this unfortunate incident could impact work progress, at least in FY2025, although Gamuda may catch up on the overall project timing subsequently, perhaps in FY2026,” the house said.
“We estimate a one-month no-work progress on this project to negatively impact our FY2025 net profit estimate for Gamuda by 0.4%. In addition, there are also costs relating to remedial works,” it added.
Maybank Research raised its TP to RM8 from RM7.25, on higher valuation multiples, “considering the potential for order book replenishment”.
Ulu Padas a positive
Meanwhile, other analysts on Monday also maintained their 'buy' calls on Gamuda, following an announcement last Friday that its 45%-owned Upper Padas Power Sdn Bhd had received a letter of notification from the Sabah regulator for the development of the 187.5MW Ulu Padas hydroelectric project.
The project is expected to cost RM4 billion, of which RM3 billion represents construction costs and the remainder is to service debt, PublicInvest Research said in a note, with its TP maintained at RM8.70.
The project, once online in 2030, is expected to generate RM400 million in annual revenue for 40 years, the analysts said.
However, there were no changes to earnings forecasts as “the construction component is still within our job win assumptions”, said Kenanga Research, which raised its TP to RM7.54 from RM7.29 “to include concession shares from Upper Padas valuation".
Overall, Gamuda appears on track to achieve a RM30 billion order book by year end, from around RM26 billion currently, the analysts said.