Gamuda Poised for RM5 Billion EPCC Award as Northern Perak Water Scheme Takes Shape

Gamuda Bhd is emerging as the frontrunner to secure the engineering, procurement, construction, and commissioning (EPCC) works for the Northern Perak Water Supply Scheme (NPWSS), a transformative RM5 billion water infrastructure project that promises to deliver dual earnings streams for the construction giant.

The project gained significant momentum following the signing of a 40-year bulk water supply agreement on Wednesday, which establishes the commercial framework for supplying treated water from northern Perak to Penang. Analysts believe the EPCC contract, estimated at RM4 billion to RM5 billion, could be awarded in the second half of financial year 2026, further strengthening Gamuda's already robust order book of RM52.3 billion.

Dual Income Streams for Gamuda

The NPWSS presents a compelling value proposition for Gamuda, offering two distinct revenue streams. Beyond the potential EPCC construction award, the group stands to benefit from recurring utility income through its 50:50 joint venture, Khazanah Air Perak Sdn Bhd, which will operate the water treatment and distribution infrastructure over the 40-year concession period .

Hong Leong Investment Bank Research estimates the project will yield an average annual profit after tax of approximately RM100 million over its first 10 years of operation, with Gamuda's 50% share contributing RM50 million annually. This recurring income is expected to commence once operations begin, targeted for the first quarter of 2032 .

The revenue structure includes a fixed annual capacity charge of about RM210 million, which secures dedicated treatment capacity and distribution infrastructure, supplemented by a supply charge of RM1.70 per cubic metre of water delivered. The agreement also features a tariff escalation mechanism of 11.75% every three years, along with cost pass-through provisions for electricity and chemical expenses .

EPCC Contract Timeline and Expectations

While the water supply agreement has provided greater clarity on the project's financial viability, the EPCC award may come at a later stage, with the sale of treated water to Penang only commencing in 2032. However, MBSB Research expects the EPCC works to be awarded in the second half of the financial year 2026, subject to the necessary regulatory approvals, including registration with the National Water Services Commission.

CGSI Research, which has reiterated an "add" call on Gamuda with a target price of RM5.78, points to the group's proven expertise in water infrastructure projects. Gamuda previously operated Syarikat Pengeluar Air Selangor (Splash), which managed the Sungai Selangor Dam and the Rasa and Bukit Bandong water treatment plants, before divesting its 40% stake in September 2018.

Analysts Maintain Positive Outlook

Most research houses have maintained their positive calls on Gamuda, citing the project's long-term earnings visibility and the group's strong order book.

RHB Research has retained a "buy" recommendation with a lower target price of RM6.11, noting the EPCC works may come at a later stage, while MBSB Research has maintained its "buy" call with an unchanged target price of RM5.60. MBSB has cut its FY27 earnings forecast by 7% to reflect the slower progression of the project's early stage, but remains optimistic about the group's prospects.

Hong Leong Investment Bank Research, which has kept its "buy" call and target price of RM5.27, estimates the construction contract to be worth approximately RM4 billion, with pre-tax margins expected at 10% to 12% . Public Investment Bank has also reiterated its "outperform" call with a target price of RM5.60 .

Strategic Importance for Perak and Penang

The NPWSS is a strategic initiative by the Perak and federal governments to address long-standing water shortages in northern Perak while supporting Penang's water security needs . The scheme is designed to transfer 1,500 million litres per day (MLD) of raw water from Sungai Perak to the Bukit Merah Dam .

Of this total, 500 MLD will be allocated for irrigation in northern Perak, with the balance made available for treatment to meet domestic and industrial demands. Penang will initially receive 300 MLD of treated water, with provisions for future increases subject to Perak government approval .

The project will also support the development of the Kerian Integrated Green Industrial Park (KIGIP), which is expected to be a transformative economic driver for northern Perak, creating jobs and attracting sustainable industries to the region.

Gamuda's involvement in the NPWSS represents a strategic return to the water infrastructure sector, combining a significant construction contract with long-term recurring income. The project's 40-year concession provides exceptional earnings visibility, while the potential EPCC award would add substantial value to Gamuda's order book . With a track record of successfully delivering complex infrastructure projects and a diversified order book, Gamuda appears well-positioned to execute this transformative project for its home state of Perak