GAMUDA: Strategic Land Acquisition Bolsters Future Earnings Outlook

A consortium involving a Malaysian infrastructure and property developer has successfully secured a significant mixed-use land parcel in Singapore, a move expected to fortify its regional presence and enhance future earnings visibility. The consortium, spearheaded by the developer’s wholly-owned subsidiary and joint-venture partners, won the tender for the 29,450 sqm Chencharu Close leasehold land from Singapore’s Housing Development Board with a bid of SGD1.01 billion (RM3.31 billion).

The acquisition paves the way for a major mixed commercial and residential development, encompassing 875 private condominium units and 135,625 sq ft of commercial space, projected to have an estimated Gross Development Value (GDV) of approximately RM6 billion. This strategic win positions the developer as a pioneering force in shaping the initial development narrative of the Chencharu area, which has seen limited new supply in recent years. This success is seen as a significant boost to the developer’s track record in Singapore’s highly competitive Government Land Sales (GLS) market, potentially improving its prospects for future tenders involving similar integrated developments.

Market Potential and Bid Analysis

Residential demand for the site is anticipated to be robust, driven by its attractive location within walking distance to Khatib MRT station and proximity to established primary and secondary schools. These attributes are expected to support healthy take-up rates upon the project’s estimated launch in the second half of 2026.

While the winning bid was approximately 20% above the second-highest offer, analysts note that the implied land cost-to-GDV ratio of around 55% falls within the typical 50-60% range observed in Singapore GLS tenders. This suggests confidence in achieving higher average selling prices, underpinned by the site’s strong locational advantages and the developer’s first-mover status in Chencharu. Furthermore, the developer’s in-house construction expertise is expected to provide critical cost efficiencies, helping to protect development margins despite the inherent complexities of integrated components such as a hawker centre and bus interchange.

Financial Contribution and Outlook

Management indicates that the project will incur main construction costs of SGD448 psf per plot ratio, with land acquisition at around SGD980 psf per plot ratio. With an estimated total development cost of c.RM4.87 billion (SGD1.48 billion) and assuming a 15% PBT margin, the development is projected to contribute RM450 million in Profit Before Tax (PBT) (based on the developer’s 50% effective stake in the JV) over the next seven years. This substantial contribution is expected to significantly reinforce the developer’s earnings visibility.

Crucially, the planned Chencharu development, being a private condominium project, will allow revenue and earnings to be recognised progressively based on the percentage of completion. This method is anticipated to smoothen the developer’s earnings trajectory throughout the development period, reducing the lumpiness often associated with property earnings recognition.

Valuation and Recommendation

Despite the significant project win, earnings forecasts for FY26-28F are currently maintained, pending greater clarity on the development timeline and precise financial contributions from the Chencharu Close project. The investment bank maintains its Sum-of-Parts (SOP) derived target price at RM0.25, reflecting a 3% ESG premium underpinned by a 4-star ESG rating. The stock retains a BUY recommendation.