News IJMLAND and Lite Bell Consl. S/B are
forming a 51:49 JV company to acquire a 999-year lease on a 2.7 ac site on
Royal Mint Street, London, UK for GBP20.0m (c.RM98.4m). It comes with
development consent for c.0.65m sf of GFA and is strategically situated above the
National Rail and DLR railway lines (refer overleaf for location). The guided
project working capital is GBP25-30m.
Comments We are positive on the venture as
the group is now seeking new earnings growth avenues in overseas given its
already high earnings base in Malaysia. The guided GDV is GBP280m (RM1.4b). The
project will see mid- to high-end apartments with a guided ASP of
GBP1000-1100psf. We reckon the guided GDV is still extremely conservative
(refer overleaf). We opine that land cost is fair, based on the gross margin
guidance of c.25%.
There are no issues with the financing of the project by
IJMLAND. We expect the group’s net gearing to inch up to 0.1x from a 4Q12 net
cash position of 0.1x, assuming a 70:30 debt-equity financing of the land and a
GBP30m working capital.
Outlook The project will only be
launched in 4QFY14, implying significant earnings contributions from FY15
onwards. In the short to medium term, the sales drivers will be from The Light
and its stable of mass housing projects (Shah Alam 2, S2@Seremban, Johor projects)
plus its long-awaited township, Rimbayu (a.k.a. Canal City), which is slated to
have a GDV of RM11b. We understand Rimbayu’s launch preview could take place
this month. Management is targeting FY13E sales of up to RM1.5b.
Forecast There are no material changes
to our FY13-14E earning as explained above, based on sales targets of RM1.5b-RM1.6b.
Rating Maintain OUTPERFORM
More affordable products are coming on line, with the company
being seen as one of the most ‘sustainable’ developers. Its project catalysts
(e.g. Rimbayu, Sebana Cove and more overseas ventures) will excite investors in
our view.
Valuation The
project adds 3 sen to our FD SoP RNAV. We have also updated our RNAV to reflect
the updated project figures. The overall total impact is a 7% increase in our
FD SoP RNAV estimate to RM3.05.
We are raising our TP to RM2.75 (from RM2.64) on a similar
10%* discount to our updated FD SoP RNAV of RM3.05 above.
Risks Unable to meet sales targets.
Delays in launches of its catalyst projects like Canal City
and Sebana Cove. Sector risks, including negative policies.
Source: Kenanga
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