[Click eStock] GS Geonseol Wins Large Desalination Plant Contract... New Business Growth Potential↑

Ebest Investment & Securities Report
"Will Increase Corporate Value Through New Business"

[Asia Economy Reporter Minji Lee] Ebest Investment & Securities maintained a buy rating and a target price of 37,000 KRW for GS Construction on the 20th.

GS Construction announced that its subsidiary GS Inima received Letters of Award (LOA) from the Oman's Public Authority for Electricity and Water (Oman Power and Water Procurement Company) for two projects: the Al Ghubrah Phase 3 and Barka Phase 5 Independent Water and Power Project (IWP). Both projects are BOO (Build-Own-Operate) schemes, where GS Construction is expected to handle financing, construction, and operate the facilities for 20 years. The anticipated revenues related to these projects are 1.634 trillion KRW and 697 billion KRW respectively, totaling approximately 2.331 trillion KRW.

Construction is scheduled to begin in the second quarter of next year. The EPC revenue from the construction phase is expected to become visible in the first half of 2022. The combined EPC revenue from the two projects is estimated to be around 300 billion KRW.

GS Construction secured approximately a 50% operating stake in both the Barka and Al Ghubrah plants. Commercial operations are planned to start in the second quarter of 2023 for Barka and the second quarter of 2024 for Al Ghubrah. Operating profits are expected to continue for 20 years thereafter.

Researcher Seryeon Kim of Ebest Investment & Securities stated, “This is the largest single water treatment plant order based on Spain’s Inima, and it is expected to serve as a long-term cash cow.”

GS Construction is expected to enhance its corporate value through new businesses going forward. After the housing rally, GS Construction has continued to execute investments such as purchasing land in Songdo worth around 200 to 300 billion KRW per single investment, acquiring Brazilian water treatment companies, and acquiring modular housing companies in Europe and the United States, using the cash secured.

Researcher Kim said, “Given the leveraged nature of the construction industry, it is more reasonable to use the increased cash for investments to boost sales rather than for dividends. In the past, there were investments in future sales through land purchases, but now that the domestic private land pool has narrowed, the capabilities of companies will differ in five years depending on which assets they invest in.”

Researcher Kim added, “GS Construction is a stock that shows remarkable sales growth through investments in future sales, and the growth potential in new business sectors will act as a factor that opens the upside value of the core construction business.”