SHL Consolidated Bhd 1Q FY 2020 Update Report (HOLD)

Date: 20/08/2019

Source  :  WILSON & YORK
Stock  :  SHL       Price Target  :  2.47      |      Price Call  :  HOLD
        Last Price  :  1.88      |      Upside/Downside  :  +0.59 (31.38%)


Residential and commercial property markets are softening throughout Malaysia. Meanwhile broad economic conditions in Malaysia continue to deteriorate. The recent rate cuts in Malaysia and around the region support our cautious outlook that we noted in our previous report. The property industry is expected to remain sluggish due to tighter lending policies put in place by Bank Negara and a broadly weaker economic environment. SHL Consolidated Bhd (“SHL”) is a well run company with a good land bank that has years to run. The company’s emphasis on good value has helped it maintain positive earnings despite very challenging conditions.


Risks to our recommendation and target price include: i) softness in property prices, ii) an increase in the general level of interest rates, and iii) an increase in the cost of building materials.


We maintain our HOLD recommendation whilst decreasing our fair value estimate to MYR 2.47. SHL has a very solid balance sheet and should be able to maintain prospective dividend yields above 6% over FY 2020- 2021. Also, the company has an excellent landbank and sound management; SHL recently formed a JV with Japan’s Marubeni Corp to construct a condominium project with an estimated GDV of RM327 mn at Bandar Sungai Long, Selangor in which SHL holds a 67% stake. The project sits on a 9.56 acre land consisting of 568 condominium units and is expected to take off soon with an expected completion date in March 2020. Though property demand does not seem robust, value investors will want to accumulate at levels below MYR 2.20.


SHL Consolidated Bhd is an investment holding company and it provides strategic, financial and corporate planning services. SHL Consolidated Bhd. and its subsidiaries are an integrated commercial and residential property development group, which are also involved in granite quarrying and manufacturing of aggregates, general building construction, earthworks, infrastructure works, the ownership and operation of a golf resort, the manufacture of clay bricks, supply of finished brickworks of wall and other brick structures, the manufacture of aluminum framed doors and windows, the provision of soil and concrete laboratory testing services, the provision of professional construction management and geo-technical services, the marketing and distribution of building materials, rental of properties and money lending business. Its subsidiaries include SHL Corporate Services Sdn. Bhd., Goodstock (Tawau) Sdn. Bhd. and Wilayah Builders Sdn. Bhd.

Source: Wilson & York Securities Research - 20 Aug 2019

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