Gamuda enters Hanoi with a bang
Posted on | August 16, 2007
By THE EDGE
Hanoi: Gamuda Bhd has made its first major foray into Vietnam with a construction-cum property development project in the capital city of Vietnam worth a total of RM9.4 billion.
According to managing director Datuk Lin Yun Ling, the Hanoi project is no less significant than the northern stretch of the double-tracking project in Malaysia. Gamuda is undertaking the project with MMC Corp Bhd on a joint -venture basis estimated at RM11 billion.
“Our portion of work in the double track is 50% (based on its equity holding) but here in Hanoi, we own 100% of this project,” says Lin in Hanoi yesterday.
The signing ceremony to firm up the project between Gamuda and the Hanoi People’s Committee (HPC), was signed on Tuesday.
Under the agreement, Gamuda is to design and construct a sewage treatment plant (STP) at the Yen So Lake, located seven kilometres off the city centre. The work also includes the redevelopment of the Yen So Park with total construction cost coming to about US$400 million (RM1.4 billion).
In return for constructing the STP and re-developing the Yen So Park, Gamuda will get the rights to develop residential and commercial properties over 182 hectares of land in the vicinity of the Yen So Park area.
The development of properties is expected to span over 10 years with a total gross development value (GDV) of RM8 billion. The project would include the development of ‘Grade A’ office towers, four- and five-star hotels, convention centres, serviced apartments and others. Including the cost of constructing the STP and the redevelopment of the park, total project value comes out to RM9.4 billion.
“We are looking at a 70:30 funding structure (70% debt and 30% equity), or 50:50. We will book in profits from the construction of the STP and the redevelopment of the park, other than the profits from property development,” says Lin, who didn’t elaborate on the level of profit margins.
The STP will be handed over to the government one year after its expected completion in 2010. The STP and the redevelopment of the Yen So Park shall be completed in 2010, in time for Hanoi’s Centennial (1,000 year) celebrations.
The rule of thumb in property business is that the land cost should not exceed 20% of targeted GDV.
Hence, given Gamuda’s sunk cost of RM1.4 billion (for constructing the STP and re-developing the park), management has to set the targeted GDV for the Yen So property project at RM8 billion. Given the size of the land, the project’s GDV is deemed high even if compared to some of the projects in Malaysia.
But Lin is optimistic of the property project in the Yen So Park.
“It is difficult to get land for development. Given the scarcity of supply of properties and the location of the land, we are confident of achieving the numbers,” he says.
According to official figures, there are some four million people living in Hanoi. The actual numbers could be as high as 10 million, including migrants from other provinces.
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