- Maintain BUY on Gamuda Bhd with an unchanged fair value of RM5.38, pegging the stock at a 5% discount to its Sum-Of-Parts (SOP) value.

- Gamuda announced that it has entered into an agreement with TPPT Sdn Bhd to acquire land measuring approximately 724 acres for RM620mil. Funding is not an issue, given Gamuda’s strong balance sheet (FY13 net gearing: 14%).

- The leasehold land comes in 14 parcels, with the leasehold tenures’ expiry ranging from 2092 to 2095. It is situated in Kampung Sg.Serai, Kuang in Selangor. It is about 28km from PJ and Shah Alam, and 30km from KL.

- Accessibility to the said land would be further enhanced once a new interchange linking the land directly into the Rawang South interchange of the North South Expressway is completed by August 2014. Construction of works at this new interchange – currently being undertaken by TPPT – commence in August 2012.

- In addition, future connectivity would be improved through:

- Kuang KTM train station - ~2.6km south of the land –located just one station away from the KTM train station/Sg.Buloh station for MRT Line 1

- A proposed Bus Rapid Transit (BRT) link by Majlis Perbandaran Selayang that departs from Kota Puteri (Ijok) and stopping at Kuang KTM train station.

- Based on RM620mil, we deem the acquisition price for the Rawang land as attractive at RM20psf for a sizeable tract of land within the fast-growing Rawang area, where connectivity is improving.

- This new landbank would help shore up Gamuda’s remaining landbank of ~1650 acres as at March 2013.

- We believe this is a strategic move by Gamuda to revitalise its landbank within the Klang Valley – where key developments such as Valancia, Bandar Botanic and Kota Kemuning are at the tail-end of their respective lifecycles.

- The Rawang land is to be developed into a premier residential and commercial enclave. Given Gamuda’s astute track record in township development, we believe the project would be well-received.

- The RM5bil-GDV project is to be developed over 16 years, potentially lifting the group’s overall GDV by 23% to ~RM27bil. The entire deal is to be completed by 3Q13. We maintain our earnings forecast pending more details.

Source: AmeSecurities