Gamuda shares rebound to close 5 sen higher

PETALING JAYA: Gamuda Bhd shares staged a rebound from last Friday's 18% decline to close 5 sen higher at RM2.50 yesterday after several analysts said the company's exposure to the Vietnam property market was overblown.

The company, through Gamuda Land Sdn Bhd, is developing the RM8bil Yen So Park, comprising a mix of residential and commercial properties on 808 acres in return for constructing a sewage treatment plant and other infrastructure works.

The stock saw 17 “buy” recommendations compared with four “holds” and three “sells”, according to Bloomberg data.

CIMB Research, which has maintained an “outperform” on the stock, said in a report that based on its current worst-case scenario where the RM3.9bil value of the Yen So Park land was stripped out and assuming zero contributions from the double-tracking project to construction profits as well as a lower construction price-to-earnings of eight times instead of 13.5 times, the revised net asset value (RNAV) would drop to RM2.78 based on a higher 30% discount to RNAV instead of 20%.

Analyst Sharizan Rosely said net earnings forecast for the next two financial years would drop by 26% to 30% if Vietnam contributions were removed.

“In view of the cautious economic environment in Vietnam, we're now cutting our revenue forecasts for Yen So,” he said, adding that revenue would be cut for the next two financial years to RM250mil from RM800mil and RM400mil from RM800mil. Gamuda's financial year ends July 31.

Sharizan said this would see earnings forecasts cut by 17% to 20% for the next two financial years.

“Although the conditions of Vietnam's economy are a concern of late, we think it is more worrying for property developers that have planned new launches in the next nine to 12 months,” he said.

Sharizan added that cost inflation and higher borrowing costs had dented affordability and demand over the past six months based on the guided 10% drop in property prices.

“However, we take comfort in knowing that it will take at least 12 months before Gamuda starts selling the commercial and residential units in the market,” he said.

Meanwhile, the share prices of two other developers exposed to the Vietnam property market, SP Setia Bhd and Berjaya Land Bhd, were down 20 sen and 24 sen, to RM3.94 and RM4.86, respectively.

By The Star (by Fintan Ng)