Stock Name: GAMUDA
Company Name: GAMUDA BHD
Research House: RHB
Gamuda Bhd (June 8, RM2.97)
Maintain underperform at RM2.99 with higher fair value of RM2.74 (from RM2.05): Despite being located 9km away from Ho Chi Minh City's (HCMC) CBD (central business district), the areas surrounding the site of the Tan Thang project do not at all lack the hustle and bustle of HCMC.
An estimated population of 900,000 within a 5km radius of the site will translate to ready buyers for the 7,000 units of apartments of the Tan Thang project. In addition, demand will also come from HCMC's 12 million population as well as wealthy Viet Kieu or overseas Vietnamese and 'the powers that be' based in Hanoi.
Previously farm land, the land is flat and just a little lower than the road level which means it does not need extensive ground treatment other than some filling to raise the elevation. Most importantly, the land is 100% cleared of squatters.
To our surprise, the consultants we spoke to in Vietnam told us that at present, the prospects of the property market in Hanoi are actually stronger than HCMC. This is because Hanoi is where 'the powers that be' are based.
In fact, some believe that the 'liquidity from Hanoi' had helped to stoke the property bubble in HCMC before it burst in 2008. According to the consultants, 'given the right products, Yenso Park should do well'.
Our forecasts are maintained. Risks to our view include: (1) new construction contracts secured coming in above our target of RM1 billion per annum in FY07/10-11; and (2) stronger-than-expected recovery in construction margins.
We are neutral on the construction sector. On one hand, we foresee improved investors' risk appetite for construction stocks following: (1) the massive underperformance of the sector vis-''-vis the market in 4Q09 and 1Q10; and (2) a better sector news flow and new expectations leading up to the announcement of the 10th Malaysia Plan (10MP) soon.
On the other hand, certain negative elements remain such as: (1) the still slow pace of the rollout of public projects, shrinking margins and declining dominance of established players in large-scale projects locally; and (2) the not-so-rosy outlook and increased operating risks in key overseas markets.
We are raising our indicative fair value for Gamuda by 34% from RM2.05 to RM2.74, having imputed for the first time a value of RM1.23 billion, translating to 54 sen per share on a fully-diluted basis, to Gamuda's two property projects in Vietnam based on discounted cash flow. ' RHB Research Institute, June 8
This article appeared in The Edge Financial Daily, June 9, 2010.
Company Name: GAMUDA BHD
Research House: RHB
Gamuda Bhd (June 8, RM2.97)
Maintain underperform at RM2.99 with higher fair value of RM2.74 (from RM2.05): Despite being located 9km away from Ho Chi Minh City's (HCMC) CBD (central business district), the areas surrounding the site of the Tan Thang project do not at all lack the hustle and bustle of HCMC.
An estimated population of 900,000 within a 5km radius of the site will translate to ready buyers for the 7,000 units of apartments of the Tan Thang project. In addition, demand will also come from HCMC's 12 million population as well as wealthy Viet Kieu or overseas Vietnamese and 'the powers that be' based in Hanoi.
Previously farm land, the land is flat and just a little lower than the road level which means it does not need extensive ground treatment other than some filling to raise the elevation. Most importantly, the land is 100% cleared of squatters.
To our surprise, the consultants we spoke to in Vietnam told us that at present, the prospects of the property market in Hanoi are actually stronger than HCMC. This is because Hanoi is where 'the powers that be' are based.
In fact, some believe that the 'liquidity from Hanoi' had helped to stoke the property bubble in HCMC before it burst in 2008. According to the consultants, 'given the right products, Yenso Park should do well'.
Our forecasts are maintained. Risks to our view include: (1) new construction contracts secured coming in above our target of RM1 billion per annum in FY07/10-11; and (2) stronger-than-expected recovery in construction margins.
We are neutral on the construction sector. On one hand, we foresee improved investors' risk appetite for construction stocks following: (1) the massive underperformance of the sector vis-''-vis the market in 4Q09 and 1Q10; and (2) a better sector news flow and new expectations leading up to the announcement of the 10th Malaysia Plan (10MP) soon.
On the other hand, certain negative elements remain such as: (1) the still slow pace of the rollout of public projects, shrinking margins and declining dominance of established players in large-scale projects locally; and (2) the not-so-rosy outlook and increased operating risks in key overseas markets.
We are raising our indicative fair value for Gamuda by 34% from RM2.05 to RM2.74, having imputed for the first time a value of RM1.23 billion, translating to 54 sen per share on a fully-diluted basis, to Gamuda's two property projects in Vietnam based on discounted cash flow. ' RHB Research Institute, June 8
This article appeared in The Edge Financial Daily, June 9, 2010.
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