KUALA LUMPUR: Following Gamuda Bhd’s land acquisition in Vietnam, brokerage firms expect a stronger recovery in its earnings and revenue from the financial year ending July 31 (FY22) onwards.
Gamuda’s wholly-owned sub-subsidiary in Vietnam, Gamuda Land HCMC Joint Stock Co, has acquired 13.8 acres of land in Binh Duong New City for US$53.88mil (RM228.5mil).
The land is part of a 2,600-acre integrated township, which is set to be the administrative centre of the nation’s affluent Binh Duong province.
Gamuda plans to develop the land into 349 landed properties, targetting the local market by tapping into a young demographic and growing middle-income group.
Moreover, the resumption of construction and business activities bode well for the group’s earnings prospects.
MIDF Research expects the group to post a “strong recovery” in FY22, supported by the increased workforce capacity at work sites due to the resumption in construction and business activities.
It noted that the group’s recent announcement on the land acquisition at Binh Duong New City shows that the group’s replenishment prospects would continue.
“For FY20, profit from overseas segment accounted for 17% of the group’s total earnings, highlighting the importance of overseas contribution.
“The strengthened balance sheet with a reduced net gearing to 21% from 30% provides the group with an enhanced borrowing capacity of RM4bil, to be potentially used for the Penang South Island project,” it added.
Considering all these factors, MIDF Research is keeping a “buy” call on Gamuda with an unchanged target price of RM3.63 by pegging a price-to-earnings ratio of 14 times to the group’s earnings per share of 25.9 sen for FY22.
“We are making no changes to our earnings estimates as the project has a long a gestation period of a medium to long-term horizon,” it said.
Similarly, PublicInvest Research is leaving its FY22 to FY24 earnings forecast unchanged pending the Vietnam’s project completion and development details.
The research house expects Gamuda’s earnings to be enhanced from FY23 onwards, given that the group plan to launch the projects by the second half of next year with a gross development value of RM495mil upon completion of its Binh Duong land acquisition in the third quarter of next year.
“Based on our preliminary assumptions of a pre-tax margin of 15% and a development period of five years with certain progress completion and sales, this project is expected to enhance our FY23 and FY24 earnings per share in a range of 2.4% to 3.1%, respectively,” it said.