Gamuda eyes continuing growth in Klang Valley

The Star

20-05-2025

PETALING JAYA: Gamuda Bhd 's proposed acquisition of 336 acres of land in Kuala Langat, Selangor, for RM248.7mil will serve as a strategic extension to the group's Gamuda Cove township, which has a current remaining gross development value (GDV) of RM18.7bil.
RHB Research in a report said 'the acquisition price of RM248.7mIl or RM17 per square foot (psf) implies a cost-to-GDV ratio of 11.3%, which is below the general rule of thumb of 20%.'
In total, the land acquisition would increase Gamuda's total land holdings by 16% to about 2,476 acres, said the research house.
'We are positive on the deal as the acquisition may strengthen Gamuda's presence in the southern part of the Klang Valley via the extension of the Gamuda Cove township,' RHB Research added.
As Gamuda intends to fund the acquisition via internally generated funds, its net gearing may only inch up to 40.5% from 39% based on figures as of end-January this year.
RHB Research said it made no changes to Gamuda's earnings forecasts because the acquisition of the land is expected to be completed in the second quarter of 2026 with future launches on the land likely take place sometime later in the future in 2028 and beyond when the Gamuda Cove township becomes more mature, in our view,' the research house said.
The research house kept a 'buy' call on the stock, with an unchanged target price of RM5.83.
'We believe its valuation will go higher than what it is now due to the data-centre factor and its latest estimated order book of about RM35bil,' said the research house.
Meanwhile, TA Research viewed the latest acquisition price as fair.
'At an acquisition price representing 11.3% of the projected GDV, the deal falls comfortably below the typical 20% land-to-GDV benchmark.
'Strategically, we believe the proposed land acquisition will unlock incremental value for Gamuda Cove, capitalising on population growth in the surrounding area,' the research house said in a report.
This, in turn, should support future visitor numbers and potential monetisation of Gamuda's existing commercial assets such as Splashmania, Townsquare and Discovery Park as well as upcoming developments including Asai Gamuda Cove, the first Asai hotel in Malaysia.
Post-acquisition, TA Research said Gamuda Cove township's unsold land will increase to an estimated 846 acres, with a total undeveloped GDV of RM20.9bil.
It noted Gamuda's strong balance sheet, with a net gearing of 0.42 times and a cash position of RM3.5bil as of end-January provides ample headroom for the acquisition.
TA Research has kept a 'buy' call on the stock with an unchanged target price of RM5.88.
Maybank Investment Bank Research (Maybank IB Research) has also maintained a 'buy' call on Gamuda at a target price of RM4.99.
The research house said earlier land buys in the Gamuda Cove area were made in 2014 at RM12psf, compared with the RM17psf for the latest acquisition.
Gamuda Cove is Gamuda's most successful township in Malaysia, contributing 31% to the developer's Malaysian property sales for last year and 16% of total property sales.
Maybank IB Research noted that Gamuda plans to develop the land as an extension of Gamuda Cove with an estimated GDV of RM2.2bil over 11 years.
It expects margins from this phase to be higher than the existing one as the heavy upfront investments in land clearing and infrastructure have been completed.
'Thus, this extension can be developed with lower capital expenditure,' added the research house.
Assuming 15% pre-tax profit margin, Maybank IB Research has estimated that the proposed land could add around RM250mil or four sen per share to net profit over its development period.
As Gamuda intends to finance the proposed acquisition via cash, the research house said, 'We estimate its end-2026 net gearing to rise to 57%, still is still below its self-imposed cap of 70%.
'Pending completion of the acquisition, our earnings estimates are unchanged.'