KUALA LUMPUR: Sabah Energy Commission's approval for the Ulu Padas Hydroelectric Project will contribute a new recurring income base for Gamuda Bhd.

The project is operated under Gamuda Bhd's unit Upper Padas Power Sdn Bhd, Sabah Energy Corp and the Kerjaya Kagum Hitech JV.

"We are positive about this development as it could potentially enhance Gamuda's engineering, procurement, construction and commissioning (EPCC) contracts, estimated at around RM400 million to RM500 million, and contribute a new recurring income base for the group, while also supporting the goals of the Gamuda Green Plan," said Public Investment Bank Bhd (PublicInvest) in a note.

The approval from the Sabah Energy Commission upgraded the project into an integrated hydro and floating solar energy project.

The integrated project carries split concession tenures of 40 years for hydro and 25 years for solar, respectively, with expected annual revenue exceeding RM450 million once completed.

"As the group has highlighted its focus within the domestic construction space moving forward, we expect more projects to be rolled out in due course," said the firm.

PublicInvest kept its "Outperform" call on the stock with a target price of RM5.60.

In a separate note, RHB Research said that the revised letter of notification from the Energy Commission unlocks the next critical milestones, allowing Ulu Padas Power to finalise the Power Purchase Agreement execution by Dec 31 and lock in optimal financing terms.

"Therefore, we make no change to our earnings estimates pending the finalisation of PPA developments and other details.

The firm maintained its "Buy" call on the stock with a target price of RM6.01.