[THE INVESTOR] GS Engineering and Construction is breaking new ground in Vietnam and earnings will improve, said Korea Investment and Securities on Sept. 19, maintaining a “buy” recommendation and raising the target price to 65,000 won (US$57.80) from 52,000 won. 

It will sign provisional contracts for a new city near Ho Chi Minh in November and will begin developing a 4.5 million square meter site. Groundwork, including delayed removal of transmission lines at the site will be completed by early next year, and it will be able to generate 10.1 trillion won in the coming decade. The project serves as the company’s mid- to long-term growth momentum. Although the total book value is US$500 million, the going price for the site is estimated to be US$400 per square meter, a leap from the purchase price of US$60. The market value of the site alone is 2 trillion won at the minimum, said analyst Lee Gyeong-ja.

Development business requires patience and comes with uncertainties, but the fact that it has managed to acquire the site at a low cost gives it a significant competitive edge. From 2020, it will generate 1 trillion won yearly revenue, offsetting the risks in housing market and drive its earnings, the analyst added. 

By Hwang You-mee (glamazon@heraldcorp.com)