This article first appeared in The Edge Financial Daily on January 29, 2019

Gamuda Bhd
(Jan 28, RM2.68)
Under review with an unchanged target price of RM2.80: We recently visited Gamuda Cove Experience Gallery in USJ Taipan, Subang Jaya. With an estimated gross development value (GDV) of RM20 billion and more than 23,000 residential units to be developed over a period of 20 years, the township is expected to be a key contributor to Gamuda Bhd’s property development division in the medium to long term.

The first three phases, comprising some 2,000 residential units, have an estimated GDV of RM1.5 billion.

The first phase of Gamuda Cove, consisting of 490 units of landed property, with an indicative GDV of RM455 million, is slated to be officially launched in February 2019. This will be followed by the launch of three blocks of serviced apartments (972 units in total) in mid-2019, and subsequently 525 units of higher-end landed properties.

Recall, Gamuda entered into a share sale agreement at end-July 2014 to acquire the entire equity interest in Salak Land Development Sdn Bhd, the landowner of 619ha of the leasehold land for a total cash consideration of RM784.3 million. The acquisition was completed on March 9, 2015.

With total land size of 1,530 acres (619.17ha) and a potential GDV of RM20 billion, Gamuda Cove makes up about 47% and 35% of Gamuda’s total unsold land banks and total remaining GDV. It is expected to be a key contributor to Gamuda’s property division in the medium to long term. For the near term, management is targeting RM380 million in property sales for financial year 2019.

Despite the current challenging property market, we believe the project should be reasonably well-received, given the differentiation strategy, good connectivity and being a rare township development adjacent to a few thousand acres of flora and fauna nature surrounding. — TA Securities Research, Jan 28