- It is reported in the media today that DRB Hicom’s (DRB)
CEO Datuk Seri Mohd Khamil had hinted that the group would be active in
corporate exercises this year as the group seeks to improve its bottom line and
reduce gearing. Nonetheless, he stopped short of indicating which part of DRB’s
business would be involved. That aside,
the group is targeting the divestment of its stake in UniAsia by 4Q2013. As far
as the divestment of Bank Muamalat is concerned, there have been discussions
with Affin Bank and there have also been interests from two more parties.
- Looking at its businesses, we find that the group could
unlock a sizeable value from its property division given the assets in hand. It
has a remaining GDV of RM11bil with key assets coming from Glenmarie Heights
(1,500 acres at GDV of RM8bil) in Iskandar Malaysia and also the Jalan Tun
Razak (opposite IJN) development worth
RM900mil accounting for 50% and 20% of its residential development market
value.
- We are not ruling out a possible spin-off of its property
arm especially given the robust interest in Iskandar Malaysia currently. Recall
there has been slew of land deals in Iskandar over the past few months
involving Mah Sing and WCT and several high-net worth investors. In fact, Tan
Sri Lim Kang Khoo’s Iskandar Waterfront Holdings (IWH) has been in the news for
a possible listing with an angle of second play into Iskandar Malaysia.
- DRB’s property division accounts for about 22% – including
its investment properties and hotel and resorts – of our SOP value of RM10.7bil
for DRB Hicom, albeit at a conservative average selling price assumption.
- From a valuation standpoint, DRB is currently trading at
an attractive CY13 PE of 9x versus its conglomerate peers of 17x. It is also
trading at a steep discount of 37% to its SOP value.
- We believe there will be strong interests for the stock in
the near term given the expected strong newsflow with the general election
around the corner.
- We maintain our BUY rating on DRB Hicom at
RM3.80/share.
Source: AmeSecurities
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