Bandar Raya Developments - Attractive offer for BRDB shares HOLD

- Bandar Raya Developments (BRDB) yesterday announced that its substantial shareholder, Ambang Sehati Sdn Bhd –  currently with an 18.5% stake - is proposing to take over the company with an offer price of RM2.90/share – a 15% premium to BRDB’s last closing price – and RM1.80 per warrant (15% premium to the last closing price of RM1.57)

- The acquisition of the remaining 81.5% shares in BRDB would involve a total consideration of circa RM1.2bil. 

- The offer price of RM2.90/share values the company at an attractive 22% discount to BRDB’s net asset per share of RM3.70/share as at end-March – vis-a-vis a 36% discount to other property stocks under our coverage. 

- The deal also values the company at 23x and 22x of its FY12F and FY13F fully diluted earnings, respectively. 

- The deal looks attractive as it provides a 21% upside to our fair value of RM2.40/share and some 22% discount to our estimated fully-diluted NAV of RM3.70/share.

- Secondly, BRDB has always been trading at a steep discount of 40%-50% to its NAV even in the recent property market boom. This is not surprising as the group has not been aggressive in new launches. Although the group has been active in landbanking over the past one year or so, it remains to be seen whether BRDB would time the market right in churning out its products.

- Thirdly the delay in disposal of its investment properties (Bangsar Shopping Centre, CapSquare Retail Centre, Menara BRDB and Permas Jusco Mall) may continue to be a drag to the stock’s performance. 

- On the flipside, BRDB is going ahead with the launch of Medang Serai (GDV: RM RM876mil) in Bangsar in 2HFY12 with 121 units on offer. The starting price for these units will be about RM4mil-RM5mil (or RM1,000psf-RM1,200psf) and we are quite positive there will be strong response given that this could be one of the last high-rise developments within Bangsar, if not the last. We are estimating an about 60% take-up within the first year.

- We do not believe the size and the price would deter buyers given the exclusive location and lack of new supply of condos within the area. Other launches for the year include: (i) 93 units at BluWater, Mines comprising semiDs, superlink and bungalows; (ii) Permas Jaya – about 100 units of Semi-Ds and 62 units of shophouses.   

Source: AmeSecurities