News Entered into agreement with Cash Band (M) Bhd (CBB)
as a JV partner to develop 194.65ac (gross) leasehold land in District of
Gombak. The landowner, CBB, is entitled to 16% of gross sales value or minimum
of RM200m. CBB is 99.98% owned by Kumpulan Perangsang Selangor Bhd.
The land is currently
golf club near Templar Park and is only 20km away from KL city. (Refer overleaf
for details).
Comments This
came as a surprise and is slightly positive since c.50% of land cost is paid
progressively over the 6-year development period; the first RM100m is only due
upon CBB meeting the CPs (12 months period). Current net gearing of 0.6x is at
the limits of our comfort level while the group requires capital to kick-start
catalytic projects like Battersea. So, progressive land payments are handy
since SPSETIA has yet to complete its 15% placement exercise (up to RM1b); post
placement, net gearing will be lowered to 0.4x.
Guided GDV of RM1.24b
over 6 years based on plans for an “eco-themed” development (e.g. Eco Park,
Pearl Island). Planning is still at a preliminary stage but we gather terraces
could be priced >RM500,000/unit onwards.
Land cost is
considered ‘fair’ since it is 16% of the guided GDV; this would imply mid-teens
development margins.
Impact to our FD RNAV
is <1% in the backdrop of c. RM104b (before accounting for stakes).
Outlook The
group has up till Apr-13 to complete their 15% placement.
Change to Forecasts
No changes to FY13-14E earnings as earliest significant
contributions are likelier in FY15E onwards.
Rating Maintain
MARKET PERFORM
Although SPSETIA has
set itself apart from other developers via its high-growth sales arising from its
overseas projects, it appears SPSETIA liquidity issues are affecting its share
price negatively. However, downside risk is limited at the 6-year trough of
1.4x FY13E PBV (-1.0SD).
Valuation Maintain TP of RM3.30 based on 40%* discount on
our FD SoP RNAV of RM5.46.
Risks Sector risks and liquidity issues.
Source: Kenanga
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