Research houses are mainly positive on Gamuda Bhd’s acquisition, via a joint venture, of Winchester House from Wessex Winchester LP.
The purchase of the London property, which currently houses Deutsche Bank AG’s London headquarters is part of the property and construction group’s Quick Turnaround Projects (QTP) strategic plan.
CGS-CIMB said the RM 1.4 billion deal “features minimal capital outlay, a high internal rate of return, and attractive monetisation/future earnings potential.”
“Successful execution of this QTP deal will demonstrate Gamudas strength in expanding its property development/investment ventures overseas and more so in prime property markets, on top of ongoing overseas expansion of its construction division,” it said in a note.
Nevertheless, the research house said it is maintaining current revised net asset value estimates pending the progress and completion of the QTP venture. It also maintained an “add”rating and target price of RM4.69 for Gamuda.
Analysts said Winchester House is an eight-storey Grade B office building but upon refurbishment will be upgraded to Grade A. Hong Leong Investment Bank gathers that “Gamuda has potential co-investors and tenants knocking on the door.”
It said the assets estimated rental yields are healthy at 6.5 per cent in the event of worst-case non-disposal. Thus, it is maintaining a “buy” call on Gamuda with a target price of RM 4.88.
Public Investment Bank Bhd, however, was neutral on this acquisition as Gamuda could only monetise the investment in “as long as five years.”
“We understand that the acquisition could only start contributing to Gamudas earnings from the financial year 2026 ( financial year 2026) onwards, assuming the refurbishment is completed in two year’s time.
“Hence, we are leaving our financial year 2023 to financial year 2025 earnings forecast unchanged pending deal completion in the third quarter and the earnings recognition timeline.
“Our outperform call is affirmed with an unchanged sum-of-the-parts target price of RM5.10,” it said.
At 12.30 pm, Gamuda fell nine sen to RM 4.08 with 1.33 million shares traded.
