[Click e-Stock] "GS Engineering & Construction Poised for Revenue Growth from Vietnam Development...Potential for Target Price Upgrade"

On September 9, Hana Securities maintained its "Buy" investment rating and target price of 24,000 won for GS Engineering & Construction, stating that there is significant potential for mid- to long-term revenue growth centered on large-scale development projects near Ho Chi Minh City, Vietnam. However, the company noted that there is room for an upward revision of the target price depending on the progress of the Vietnam development projects.

Kim Seungjun, a researcher at Hana Securities, estimated that the total revenue potentially generated from the development of three areas near Ho Chi Minh City-Thu Thiem, Long Binh, and Nabe-planned by GS Engineering & Construction, would exceed 12.5 trillion won. This is a conservative figure, limited to revenue from residential development, and does not include income from land sales or office development sales. The estimate is based on an average pre-sale price of 520 million won per household (over $3,500 per square meter) and the supply of approximately 24,000 units.

Considering the sites currently owned by GS Engineering & Construction and the pre-sale prices of villas and apartments that have already sold out, the average pre-sale price per household is considered to be conservatively set. At present, all land compensation has been completed, and site preparation for infrastructure construction is either underway or needs to be carried out. As a result, the pace of revenue recognition is slow, but it is expected that initial annual revenue recognition of 200 billion to 300 billion won will be possible through 2027.

Researcher Kim stated, "The land acquisition price was finalized before 2017, and construction contracts have been entrusted to local builders, so the business margin should be considerable." He added, "From 2030, we expect to see full-fledged revenue growth from areas such as Nabe and Long Binh."

The increasing difficulty of acquiring land in Vietnam going forward is expected to work in favor of GS Engineering & Construction, which has already secured sites. Kim explained, "The timing of land acquisition approval and price assessment by Vietnamese authorities differ, and the purchase price rises over time as future development gains are factored in. In particular, privately owned land is even harder to acquire, as there is no compulsory expropriation procedure."

He continued, "However, GS Engineering & Construction secured the Long Binh and Thu Thiem sites in exchange for approximately $300 million in TBO road construction costs, and obtained investment approval for the Nabe site in 2007, completing land compensation in 2017. Given the current challenging environment for site preparation, the value of these sites will be very high even in future land sales." He further emphasized, "With the amendment of the Land Law in 2024, the method of land price assessment has shifted to a market-based system. If land prices rise to market levels, it will be advantageous for developers like GS Engineering & Construction who have already secured land."