MORNING CALL:24/7/23

Gamuda’s purchase in Vietnam a big get, according to CGS-CIMB

Transcript

00:00 We start the last full week of July with Gamuda's big purchase in Vietnam that it announced

00:06 last week and what the analysts are saying about it.

00:09 CGSC IMB is positive overall.

00:11 It already has a buy call and target price of RM5.58, which is the highest price target

00:16 according to Bloomberg.

00:18 Gamuda's property arm, Gamuda Land, has acquired from three Vietnamese individuals 100% equity

00:23 interest in Tam Luk Real Estate Corporation, which owns 9.1 acres of land in the prime

00:29 district 2 area of Ho Chi Minh City.

00:31 The purchase price is around US$315 million, translating into US$795 per square feet or

00:40 RM3,708 per square feet.

00:44 Gamuda guided that the GDV for this project is US$1.1 billion with pre-tax margin guidance

00:50 of 15-20%, which is above the group's 9-month FY23 property pre-tax margins of 15%.

00:58 According to CGSC IMB, assuming margins of 15% and development duration of 5 years, profit

01:03 contribution for FY25 will be 153 million or 13% of current FY25 pre-tax profit.

01:12 The research house says it gives Gamuda an opportunity to have continuity in its foothold

01:17 in Ho Chi Minh City, while its execution risk is contained as this is Gamuda's sixth project

01:21 in Vietnam and planning approvals have all been obtained.

01:25 This is also part of Gamuda's Quick Turnaround Project or QTP strategy, which sets an equity

01:30 IRR of at least 18% with a five-year turnaround.

01:34 Gamuda, unsurprisingly, very well covered and according to Bloomberg's updated data,

01:38 there are 16 buys and one loan contrarian sell from JP Morgan.

01:42 The average target price shakes out to RM5.09, which implies a possible 13% upside from current

01:48 levels.

01:48 [music]