Gamuda to cement its presence in Vietnam


PETALING JAYA: Gamuda Bhd’s proposed acquisition of 9.1-acre prime land in Ho Chi Minh City is expected to strengthen the construction and property group’s presence in Vietnam.

According to analysts, the RM1.5bil purchase fits well into Gamuda’s plan to expand its overseas portfolio, and hence, would be positive for the group’s growth.

Gamuda had announced that its unit had entered into a share sale agreement to acquire 100% equity interest in Tam Luc Real Estate Corp, which solely owns the mixed-use plot of land in Thu Duc City, Ho Chi Minh City.

The transaction was expected to complete by the third quarter of this year.

The land was shovel-ready, and Gamuda had intentions to develop it into a mixed-use high-rise project that would carry a gross development value of about RM5.1bil over five years.

Hong Leong Investment Bank (HLIB) Research noted that the strategic location of the land puts Gamuda in a good position to continue its growth trajectory in Vietnam.

“We are positive on this acquisition as Gamuda is deploying funds into a longer term and bright real estate market during a cyclical downturn due to relatively attractive asset valuations,” the brokerage said.

It said the balance sheet impact from the acquisition, which would be funded via a combination of internally generated funds and borrowings, appeared manageable.

HLIB Research noted that Thu Duc City had one of the highest urbanisation rates at more than 83% in Vietnam and contributed around 7% of Vietnam’s gross domestic product.

Citing International Monetary Fund’s projections, it said, Vietnam was expected to chart one of the fastest growth rates in the region.

HLIB Research maintained its “buy” call on Gamuda, with an unchanged target price of RM4.92 based on 10% discount to sum-of-parts (SOP) value of RM5.47.

Similarly, Kenanga Research maintained its “outperform” call on Gamuda, with an unchanged target price of RM5.15.

“We are positive over the acquisition that will expand Gamuda’s presence in Vietnam,” it said.

“This is part of its expansion plan in Vietnam as well as being a part of its quick-turnaround-project strategy, which focuses on generating a continuous pipeline of high internal rate of return assets with investment horizon of within five years,” it added.

Kenanga Research said it expected the Vietnam project to contribute about 12 sen per share to its SOP valuation for Gamuda.

TA Research said while it was optimistic about Gamuda’s latest proposed land acquisition as it was part of the latter’s quick-turnaround-project strategy, it had not yet factor in the earnings impact from the proposed acquisition, pending the deal’s completion.

Commenting on the deal, TA Research said: “The acquisition will help the group replenish its land and strengthen its presence in Vietnam.”

“We believe funding will not be an issue given that the group has a strong balance sheet with net gearing of 0.1 times as of April 2023.

“Based on our estimation, the net gearing is expected to increase to 0.2 times after the deal,” it added.

TA Research maintained its “buy” call on Gamuda, with an unchanged SOP-based target price of RM5.03.

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