GAMUDA - Gamuda township in Rawang
Author: kltrader | Publish date: Fri, 14 Jun 2013, 10:15 AM
To acquire 724.292 acres of agriculture leasehold land in Rawang from TPPT S/B for RM620m (RM19.65/sq ft). The lease tenures’ expiry ranges from year 2092 to 2095. The proposed development has an estimated GDV of RM5bn over a period of 16 years.
The land is located in Kampung Sungai Serai, Kuang, about 11km south of Rawang Town. It is next to the Rawang South Interchange of the North-South Expressway.
The deal is expected to be completed by 3QCY13.
Sizable replenishment…. As highlighted in our report “Lining up the next rail” dated 14 May-13, this deal came as no surprise to us given Gamuda’s aspirations to replenish its land bank. The acquisition will substantially boost Gamuda’s remaining GDV by 28% (see Figure #1). We are positive on this deal as it will provide continuity in development profits instead of relying on their Vietnam venture given the maturing townships of their local property portfolio. We believe that Gamuda will be able to replicate their success in Kota Kemuning, Bandar Botanic, and Horizon Hills for their latest land bank.
Reasonable… Assuming an average land conversion premium of 25%, the actual land cost works out to RM775m (RM24.56/sq ft), making up 15.5% of GDV. Again, assuming a plot ratio of 1x and efficiency ratio of 55%, the ASP works out to RM288/sq ft. We believe that both the land cost and projected ASP is reasonable.
Balance sheet… The payment for the land will be in 3 instalments with the first tranche of RM200m, and balance of RM420m over the next two years. Assuming an outright cash outlay, Gamuda’s net debt and net gearing will increase from RM890.9m and 21.3% to RM1.51bn and 36.2% respectively. We believe that Gamuda has no problem funding the acquisition.
20 sen/share… Assuming a PAT margin of 20% and 10% discount rate, the NPV of future profits from this Rawang venture may potentially work out to 19.6 sen/share (FD: 17.5 sen/share) for Gamuda.
Execution risk; Failure in securing new projects; Political and regulatory risk; Rising raw material prices; Unexpected downturn in the construction and property cycle; Sharp depreciation of the VND.
Although prospects for Gamuda remains bright, we believe that much of the positive catalysts have already been factored in its share price. Given that the current price has exceeded our TP slightly, we maintain our HOLD call.
Maintain TP of RM4.42 based on SOP valuation (see Figure #2).
Source: Hong Leong Investment Bank Research - 14 Jun 2013
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