Benalec Holdings - Moving forward in measured strides BUY

- Maintain BUY on Benalec Holdings with our fair value trimmed ~15% to RM2.40/share to account for: -  Possible shift in the recognition of an RM8mil gain on land sale of a 9-acre plot near Kota Laksamana (could now be captured in 1QFY13F instead of end-4QFY12F);  -  A six-month delay in the roll-out of the Pulau Indah industrial park contract worth ~RM75mil;  -  Charge-out of ESOS expenses totalling RM15mil over FY12F-13F (non-cash); and -  More conservative margin assumptions for its upcoming Johor project against an evolving global macro picture.

- Benalec’s core fundamentals remain intact, with an outstanding landbank of ~900 acres in Malacca that can last through 2016. It is ramping up works on the 250-acre DMDI project at Kota Laksamana (work progress: ~15%).

- This highly-valuable piece of prime sea-fronting land is located on the fringes of Malacca city centre. More value should accrue once a new coastal highway within the vicinity is completed by the end of next year. 

- Recent land sale benchmarks near Kota Laksamana were concluded at ~RM45 psf, albeit on a smaller plot of ~9 acres. As such, we have raised our average land sale price forecast in Malacca from RM28psf to RM32psf.

- In Selangor, Benalec has just started some initial  site preparation works for the Pulau Indah industrial park – located diagonally opposite West Port in Port Klang.

- Benalec is working towards formalising an agreement with the Johor government for its maritime industrial park proposal in South Johor. It remains committed to kick off the project – earmarked as a future oil hub – in 2H 2012. 

- We project FY13F net profit to jump 25% YoY to RM100mil (FY12F: RM80mil or -11% YoY), – part of it coming via maiden contributions from Johor. It already has an MoU with Rotary Engineering to co-develop an integrated petroleum storage facility on 250-acres of land at Tg.Piai.

- In addition, the rising proliferation of activities within Petronas’ RM60bil RAPID project can only benefit the future land value for Benalec’s other major landbank in South Johor at Pengerang (1,760 acres).  

- Benalec is set to release its 3QFY12 results tomorrow. We see a significant scope for NAV upgrades, as we have only included Phases 1 & 2 of its Tg.Piai landbank (or 38% of its entire Johor landbank of ~5,245 acres).     

Source: AmeSecurities