Gamuda plans premier development near Rawang

by **Cals** Mon 17 Jun 2013, 11:17

Business & Markets 2013

Written by Affin IB Research

Monday, 17 June 2013 10:35

GAMUDA BHD []
(June 14, RM4.69)
Maintain buy at RM4.66 with a target price of RM5.29: Last Thursday, Gamuda announced that it has resolved to accept TPPT Sdn Bhd’s (TPPT) offer in relation to the proposed acquisition of 14 parcels of vacant leasehold land in the mukim of Rawang, in Gombak district, Selangor, measuring in total approximately 724.3 acres (293.1ha), for a total cash consideration of RM620 million (or RM19.65 psf).

The proposed acquisition is subject to conditions precedent and the purchase consideration will be paid in four instalments over 24 months.

The land, all currently classified as agricultural land with expiry in tenures ranging from the year 2092 to 2095, is situated in Kampung Sungai Serai, Kuang, about 11km south of Rawang Town, and is 30km from Kuala Lumpur, 28km from
Petaling Jaya and 28km from Shah Alam. Flanking the land is the Rawang South Interchange of the North-South Expressway, to which both Guthrie Corridor Expressway and LATAR Highway are connected.

There is a new interchange under CONSTRUCTION [] (expected to be completed by August 2014 and fully funded by TPPT) linking the land directly to the Rawang South Interchange.

Situated about 2.6km from the land is the Kuang KTM station, which is merely one station away north of the Sungai Buluh KTM station/MRT station which also provide access to the Putra LRT Line, monorail system and the Express Rail Link (ERL) at KL Sentral.

Thirty kilometres from Kuala Lumpur may seem far now but the land Gamuda proposes to acquire will eventually be considered “close enough”, what with the KTM, LRT and MRT links. Gamuda intends to duplicate its success in Kota Kemuning, Bandar Botanic and Horizon Hills, and plans to develop the land into a premier residential and commercial enclave.

Given the increasingly scarce supply of land in the Klang Valley, we believe the acquisition price of RM19.65 psf is fair. Gamuda is confident of the long-term prospects of its property development business in Malaysia and the proposed acquisition is in line with its plan to spend RM3 billion or more in the next three years to increase its landbank in a few major cities.

Funding for the proposed acquisition is not an issue given its high cash reserves and low net gearing (RM1.7 billion and 0.1 times respectively as at Jan 31, 2013) and good profits from its construction and property divisions. We maintain our FY13 to FY15 forecasts, price target of RM5.29 (at 16 times 2014 calendar year earnings per share) and “buy” call. — Affin IB Research, June 14

This article first appeared in The Edge Financial Daily, on June 17, 2013.