The purchase represents an expansion in Gamuda’s Quick Turnaround Projects (QTP) strategy in search of higher returns in real estate development, which had seen it invest in QTPs in Vietnam earlier.
PETALING JAYA: Gamuda Bhd
’s ground-breaking acquisition of London’s Winchester House – the current UK headquarters of Deutsche Bank AG – has analysts largely maintaining a “positive” view on the counter.
The purchase represents an expansion in Gamuda’s Quick Turnaround Projects (QTP) strategy in search of higher returns in real estate development, which had seen it invest in QTPs in Vietnam earlier.
The property and construction titan entered into a joint-venture with UK-based property investment firm, Castleforge, to acquire Winchester House, a 317,000-sq-ft commercial building in London, for £257mil (RM1.4bil).
Hong Leong Investment Bank Research said in its note published yesterday that the deal was the fourth major acquisition by Gamuda since December last year, bringing the total acquisition value up to RM2.2bil.
Its analyst Edwin Woo said, “Gamuda’s game plan post-execution of sales-purchase agreement is to secure approvals for refurbishment within a year; secure pre-lease arrangements with potential tenants; divest a 37% stake to selected co-investors, preferably at a profit after de-risking; and subsequently to dispose of the asset upon completion of refurbishment after three years.”
Woo further reported that Gamuda’s management had estimated a net profit upon disposal of £95mil (RM516mil), at an equity internal rate of return of 27%.
He reiterated a “buy” call on the stock with a target price (TP) of RM4.88 a share, while also maintaining forecasts, adding the incremental financing cost of the deal for the developer would be offset by near-term rental income.
Meanwhile, CGS-CIMB Research is optimistic on Gamuda on the acquisition itself, given its minimal capital outlay and potentially attractive future earnings potential.
The research unit’s analyst Sharizan Rosely opined the successful execution of this QTP deal will demonstrate Gamuda’s strength in expanding its property development or investment ventures overseas, and more so in prime property markets, coupled with ongoing overseas expansion of its construction division.
He noted the Winchester QTP will carry a base-case total capital expenditure of £733mil (RM4bil), including acquisition, redevelopment and operating costs as well as financing.
As part of the monetisation strategy, Gamuda intends to reduce its 75% stake in the joint-venture – to be named Venta Belgarum LP – to 38% via the entry of a co-investor.
Sharizan, likewise, maintains an “add” call and TP of RM4.69 a share on Gamuda.
He noted that his estimate for the company’s earnings per share was also unchanged, pending the completion of the QTP venture.
While concurring that the potential return from the QTP deal was sizeable, Maybank Investment Bank Research analyst Wong Chew Hann is maintaining a “neutral” stance on the proposed acquisition at present.
“Our key concerns include that of locking in pre-lease arrangements with quality tenants, and a longer timeline to reduce its equity stake and to exit the investment altogether,” she wrote in her research note.
Wong, nonetheless, is keeping her 12-month TP of RM4.60 a share for Gamuda.
