RHB IB upbeat on Gamuda’s prospects in Ho Chi Minh City, raises target price to RM6.55

• In a note on Monday, the research house said that based on its assessment, Ho Chi Minh City is set to grow and be a major driver of 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.

KUALA LUMPUR (May 20): RHB Investment Bank Research has maintained its 'buy' rating for Gamuda Bhd (KL:GAMUDA) at RM5.58, with a higher target price of RM6.55 (from RM6.30), and said it is upbeat on the prospects Ho Chi Minh City (HCMC) has for Gamuda’s property arm.

In a note on Monday, the research house said that based on its assessment, HCMC is set to grow and be a major driver of 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.

HCMC’s property market overview

RHB said that overall, property supply remains low, while demand is expected to remain stable-to-strong amid low interest rates, combined with better foreign direct investment in HCMC.

“In the first quarter of 2024, the primary supply of apartments in the city reached 4,922 units (-27% 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 HCMC,” it said.

RHB made no changes to its earnings estimates, but tweaked its discount to property revalued net asset value to 45% from 50%.

“This is to reflect the bright prospects of HCMC’s property market, which is set to drive the growth of Gamuda’s overseas property segment.

“A specific catalyst for HCMC is faster-than-expected acquisition of new projects in HCMC, while a general catalyst for the group would be faster-than-expected job wins for its construction arm. 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,” it said.

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