• Gamuda’s wholly-owned Gamuda Land is acquiring 8 parcels of freehold land measuring 532 acres in Gombak for RM360mil from Kundang Properties. Planned as an extension to the existing Gamuda Gardens township, the land is slated to be the site of a mixed-development project with an estimated GDV of RM3.3bil.

• Gamuda Gardens is an 810-acre mixed township, which will be developed over 20 years. The township currently has an overall average take-up rate of more than 90% for all of the landed properties since its launch in 2017.

• The acquisition of the land will be funded by internally generated funds and borrowings. Gamuda has an estimated net cash of RM700mil (including RM1bil proceeds from the sale of expressway). Assuming the acquisition is fully funded by debt, Gamuda would still be able to maintain a net cash position at RM340mil.

• The acquisition price of RM360mil (or RM16 psf) implies a cost-to-GDV ratio of 11%, below the general rule of thumb of 20%. Based on our channel checks, the asking price for nearby lands measuring 1.4 acres to 60 acres is higher, ranging from RM25 psf to RM32 psf. We believe that Gamuda’s acquisition price is lower than the market given that the land does not have direct access to main roads and its relatively larger size.

• The land acquisition is expected to be completed this year and the mixed development will be launched in 2026F. We maintain our earnings estimates as the project will only contribute to Gamuda’s earnings from FY26F onwards.

• Gamuda currently trades at a fair 13x FY24F PE, near its 5-year historical average of 12x. Hence, we maintain HOLD with an unchanged SOP-based fair value of RM4.10/share, which implies a FY24F PE of 14x, 1 standard deviation above its 5-year average.

Source: AmInvest Research - 4 Jan 2023