Monday, August 11, 2014

Guocoland (Malaysia) Berhad - Unlocking RNAV (淨資產值折價逾50%‧國浩置地被低估)

War chest of landbanks.The group has a remaining total landbank of c.9,300 ac, of which 51% is in Sepang, 41% in Jasin, Melaka, 6% in Rawang and balance are niche parcels, which are mostly located in prime areas in Klang Valley (e.g. KLCC, Gombak, Sg Buloh, etc). This under researched group’s landbank size is not too far behind UEMS of c.12,000 ac and more than IJMLAND’s c.6,000 ac while its landbanks are mostly located in Klang Valley. We think that Guocoland’s current market cap of RM1.2b is unjustified when compared to IJMLAND’s RM5.2b and UEMS’s RM9.4b. Notably, the bulk of its landbank was acquired in the 1990s and early 2000, which would imply low land cost. Recently, the group also increased its stake in one of their JCE which owns 3,869 ac of landbank in Jasin, Melaka (refer overleaf).

3-year pipeline GDV of RM2.5b, which was recently highlighted in The Edge, comprising: (i) landed residential project at Emerald @ Rawang project, (ii) township development at Pantai Sepang Putra @ Sepang, (iii) high-end landed residential at Alam Damai @ Cheras, (iv) 28 factory units at PJ City Commercial Hub, and (v) portions of Damansara City. Positively, it appears that a substantial amount of projects are geared towards landed residentials or industrials, which should fare well in terms of sales.

Damansara City (GDV: RM2.5b) will benefit from upcoming MRT station. The project is located next to Pusat Damansara and directly fronts the upcoming MRT station. The group is in the midst of selling its DC Residency. We also do not discount Guocoland selling its completed offices via en bloc sales or securing JV investors. Note that the group also has a 21.7% stake in Tower REIT that invests in offices, and is the manager of the REIT; this could be an avenue for asset realization as well. (Refer overleaf).

Under heat from UMA query. Last week, Bursa issued a UMA query. Guocoland’s share price had shot up 50% within a 5-day trading period with heavy daily trading volumes. The company has reverted to Bursa stating they are unaware of any reasons for such strong price performance. Based on our analysis of previous the stock movements which have experienced UMA this year, we gather that from the date of UMA, the quantum of correction is between 11% to 18% and the correction period will last 16 – 50 days before bottoming out.

Projecting FY14E and FY15E core profits of RM49.3m (+43% YoY) and RM65.6m (+33% YoY). 9M14 core earnings grew by 47% YoY to RM40.9m driven mainly by margin expansions from its property divisions. Our FY14 estimates are based on annualized 9M14 figures. FY15 should be driven by stronger property sales of RM640m from PJ City, DC Residency, Emerald and its Sepang project (refer overleaf).

An under-researched counter. The stock has a very volatile 3-year historical PER range of 11x-138x (average: 30x) while its PBV range is 0.7x-1.3x (average: 0.9x). We believe there is a mismatch in terms of the company’s asset value and their speed of RNAV realization. However, in view of better earnings prospects via unlocking of landbanks in the near future, we expect its PERs to narrow the gap with its peers.

An RNAV play. Primarily, our RNAV is driven by revaluation on its landbank, investment property and inventory value to market prices. Only DC’s project is valued based on DCF of its future profits. Thus, our valuations are conservative as we are opting for land-driven RNAVs rather than assuming full development value of each landbanks. We derive an RNAV of RM5.89 and assume a steep 50% discount (higher than our average discount applied on developers of 31%) to derive a TP of RM2.95. We recommend that investors buy on weakness as we strongly believe that Guocoland is severely undervalued. Trading BUY.

Source: Kenanga

肯納格表示,單單白沙羅城總發展值就達25億令吉,預料可從未來捷運計劃中獲利;該計劃就坐落在白沙羅前政府大廈附近,可直達捷運站。同時也正在脫售其DC Residency,聯營投資者整棟脫售其完成的辦公室商產。
肯納格認為國浩置地可從以往收購的低土地價格,使屋業計劃受其惠,特別是D CResidency,減低融資成本,明年即將完工,靈區計劃將很快作出貢獻;至於萬撓Emerald鎮則為提供長足盈利。