Gamuda is acquiring 389 acres of freehold land in Springhill Industrial Park, Port Dickson, from West Synergy SB, a joint venture (JV) between MUI Properties and Chin Teck Plantations for RM424.4m. The land is planned for development of cloud/data centre infrastructure. We view this development positively, as it aligns with the Group's expansion of its digital infrastructure business. However, we keep our earnings forecast unchanged pending the completion of the acquisition in July 2025 and awaiting further details from management. We maintain our Outperform rating on Gamuda, with an unchanged SOTP-based TP of RM5.20, adjusted post bonus issue.

• Rationale of the acquisition. The subject land, approximately 389 acres of freehold agriculture land, is located in Springhill Industrial Park, Port Dickson, within Malaysia Vision Valley 2.0, a state-led development initiative aimed at advancing the country's progress in digitalisation and high-tech digital infrastructure development. Gamuda intends to use the land to develop cloud or data centre infrastructure.
• Fair pricing. The purchase price of RM424.4m which is approximately RM25 psf, is in-line with the median price of RM31 psf for land transactions recorded in the vicinity over the past 12 months. The acquisition will be funded via internally generated funds. To recap, Gamuda has a cash pile of RM3.6bn and low net gearing of RM0.39x as of 1QFY25. The land purchase is expected to be completed by the end of July 2025.
• Digital Infrastructure business expansion. We view this development positively, as it aligns with the Group's strategic push to make digital infrastructure business its third core business, following construction and property development. To recap, Gamuda entered the digital infrastructure business earlier this month through a 50:50 JV with Dagang NeXchange to deliver Google Distributed Cloud (GDC) air-gapped services to security-sensitive entities such as government and financial institutions. In addition, Gamuda acquired a 20% stake in Cloud Space SB, a google Cloud Premier Partner and expert in cloud engineering, to enhance the Group's in-house technology and digital capabilities. Coupled with its involvement and experience in building data centres, we believe the Group is well positioned to tap into the technology services market and ride the AI wave.

Source: PublicInvest Research - 31 Dec 2024