Gamuda poised to ride on property arm’s projects in Vietnam

Petaling Jaya: Gamuda Bhd’s property arm, Gamuda Land Sdn Bhd’s projects in Ho Chi Minh City should stand the company in good stead, moving forward, says RHB Research.

The Vietnam property projects have contributed 30% to the group’s revenue for the financial year ended July 31, 2023.

“Based on our assessment, we believe Ho Chi Minh City is set to grow and be a major driver for Gamuda Land’s growth in Vietnam while maintaining the country’s contribution of at least 25% to 30% of group revenue in the coming years,” the research house said in a report on Gamuda.

RHB Research pointed out that property supply remains low while demand is expected to remain stable-to-strong amid low interest rates, combined with better foreign direct investment in Ho Chi Minh City.

In the first quarter of 2024, the primary supply of apartments in the city reached 4,922 units, which is 27% lower year-on-year.

“The slow legal completion process continually impacted on the market’s new supply. On the flip side, new supplies recorded a high absorption of 80%, indicating a vibrant apartment market in Ho Chi Minh City,” RHB Research noted.

With Celadon City nearing completion, the research house predicted that Gamuda Land may focus more on its quick turnaround projects, with the latest being Eaton Park in Thu Duc City, which carries a gross development value of US$1.1bil.

“Eaton Park was officially launched on May 18 with a take-up rate of 95% within two hours after the launch. Looking ahead, we gather that Gamuda Land plans to invest about US$800mil within the next five years with a focus on Ho Chi Minh City,” it noted.

Near-term new launches include The Meadow and Springville, which would be strategically located near key connecting highways, said RHB Research.

It said a specific catalyst for Ho Chi Minh City is Gamuda’s faster-than-expected acquisition of new projects in the Vietnamese city, while a general catalyst for the group would be the swift job wins for its construction arm.

Interestingly, it added: “Gamuda continues to be one of the cheapest large-cap construction stocks – trading at 14.7 times price-earnings (P/E) – and we view this is unjustified, as it was trading at 16 times P/E during the construction upcycle in mid-2017.”

RHB Research said key downside risks that may stem from Ho Chi Minh City include lower-than-anticipated take-up rates in upcoming launches, while general risks for the group as a whole would be overall sluggish job replenishment trends for the construction arm.

While making no changes to its earnings estimates for Gamuda, the research outfit is tweaking its discount to property revised net asset value (RNAV) to 45% from 50%. reflecting the bright prospects of the Ho Chi Minh City’s property market, which is set to drive the growth of Gamuda’s overseas property segment.

“Consequently, we arrive at a new target price of RM6.55 a share for the counter, maintaining our ‘buy’ call,” RHB Research said.