Property Sector - RRI land is ready to be unleashed? OVERWEIGHT

-  It was reported in the Financial Edge Daily today that Employees Provident Fund (EPF) would soon be completing the acquisition of RRI Land in Sg Buloh and the announcement should be made by end of the month.

-  The report said the price of the 2,200acre piece of land would be RM2bil which works out to about RM21psf and the land would be bought as agricultural land. 

-  Comparing to recent transactions on large tracts of land within Klang Valley, this is certainly on the higher side, e.g. Setia Alam @RM3.50psf and Canal City @RM5.00psf. However we acknowledge that the land is surrounded by matured townships of Subang and Petaling Jaya.

-  We also understand that Kwasa Land is ready to unveil the master plan of the development and tenders will soon be called for outright sale of the parcels of land. EPF said the land would be carved out in portions of 30 to 50 acres. We will not be surprised if the intense bidding would result in prices of the land to go up to RM100psf.

-  The announcement would be very much welcomed by the developers although we feel that it may not have much of an impact on property equities given the weak sentiment right now. 

-  Having said that, our top pick for the sector is IJM Land (FV: RM3.80/share) with the unveiling of Bandar Rimbayu would drive its new sales by at least 50% to circa RM2bil for FY13F. We expect IJM Land would be able to generate about RM500mil-RM600mil sales from the 1^st  phase alone. The group is also trading at a deep discount of 50% to its NAV. 

-  While we like SP Setia for its strong sales – on track to achieve record RM4bil sales target – and exciting land deals such as Qinzhou and Battersea Power Station, we think the stock is at best a HOLD given the uncertainty on the continuity in the management team after 2014 – which is crucial given the key developments in the pipeline goes beyond three years - while shares are also tightly held between few parties.

-  We also have BUYs on IGB Corporation (FV: RM3.50/share), CapitaMall M’sia Trust (FV: RM1.68/unit) and Pavilion REIT (FV: RM1.33/unit). We have HOLD recommendations on Bandar Raya Developments (FV: RM2.30/share), Glomac (FV: RM0.96/share) and Al-Aqar Healthcare REIT (FV: RM1.39/unit).

Source: AmeSecurities