Analysts: Gamuda banking on current property demand trends

by **Cals** Sat 15 Jun 2013, 14:50

Saturday June 15, 2013
Analysts: Gamuda banking on current property demand trends
By WONG WEI-SHEN
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PETALING JAYA: [url=http://archives.thestar.com.my/search/?q=Gamuda Bhd]Gamuda Bhd[/url] is seen to be leveraging on current property demand trends and “jumping on the bandwagon” to launch an integrated township development in Rawang.
On Thursday, Gamuda announced on Bursa Malaysia that it would be acquiring 293ha of land in Rawang from [url=http://archives.thestar.com.my/search/?q=TPPT Sdn Bhd]TPPT Sdn Bhd[/url] for a total cash consideration of RM620mil.
It said in the statement that the proposed acquisition would enable it to increase its land bank to further establish its position in the property development sector.
Analysts are positive on the latest deal, as it would help Gamuda sustain its township development business over the long term.
“This would help to sustain its property development profits over the long term,” said [url=http://archives.thestar.com.my/search/?q=RHB Research]RHB Research[/url] in a note.
The cumulative land is situated in Kuang, approximately 30km from Kuala Lumpur, and is right next to the Rawang South interchange on the North-South Expressway, where the Guthrie Corridor Expressway and LATAR Highway are connected at.
The price tag of RM620mil, which translates to about RM20 per sq ft, is said to be fairly comparative to market prices in the surrounding area that ranges between RM18 per sq ft and RM25 per sq ft.
Gamuda intends to finance the acquisition via internally-generated funds and/or bank borrowings. Analysts opine that funding will not pose an issue, as gearing remains at a comfortable level.
“The RM620mil cash outlay would raise Gamuda’s net debt and gearing of RM969mil and 0.23 times as at Jan 31, 2013 to a manageable RM1.6bil and 0.38 times,” said RHB.
It intends to develop the piece of land into a premier residential and commercial enclave. It added that the proposed project was projected to generate an approximate gross development value (GDV) of RM5bil over a 16-year sales period.
The acquisition would bring Gamuda’s Malaysian GDV to RM13.6bil, said Alliance Research. “Assuming the RM5bil GDV is spread equally over 16 years at a 20% profit-before-tax margin, our financial year ending July 31, 2014 (FY14) and FY15 earnings would be enhanced by RM46.9mil or 6.9% and 5.9%, respectively,” it said.
Gamuda expects the acquisition to be completed by the third quarter of 2013.
Post-13th general election, RHB believes that investors will revert their focus on sector fundamentals that are reasonably attractive, underpinned by a construction upcycle.