Further  to  the  acquisition  of  619  ha  (1,530  ac)  of  agricultural  land  for RM784.3m announced in Aug14, GAM (RM5.00) announced yesterday that its  wholly-owned  subsidiary,  Setara  Hati  had  on  1  Dec14  entered  into  a SPA  with Bukit  Melati for  the  acquisition of  a piece  of  leasehold  land  (99 years) measuring approximately 104.1 ha (257 ac) for RM392.2m cash. The acquisition  price  works  out  to  approximately  RM35  psf  compared  to  the RM12 psf for the earlier piece of land. The said land however is located 2 km  from  Kota  Kemuning.  The  SPA  is  conditional  upon  the  CPs  being fulfilled no later than six months from the date of the SPA. (Source: Bursa Malaysia)

Comment:  The proposed acquisition is in line with the group’s strategy to increase  its  land  bank  to  further  establish  its  position  in  property development  and  increase  its  investment  property  portfolio.  When completed,  the  proposed  acquisition  will  raise  the  group’s  land  bank  to 3,947  ac,  including  630  ac  in  Vietnam.  GAM  has  established  a  strong reputation  as  a  developer  of  quality  properties  (including  Kota  Kemuning) and we expect its well-conceived property products to continue to receive good response from buyers faced with declining supply of landed properties in the Klang Valley.

We maintain our ADD rating for Gamuda with an unchanged target price of RM5.30.

Source: Affin Hwang Capital Research - 2 Dec 2014