Investment Highlights

• We initiate coverage on Crest Builder Holdings (CBHB) with a BUY recommendation, pegging a fair value of RM1.83 based on an SOP valuation (Exhibit 4). We expect the company to register core net earnings of RM20.0mil, RM21.8mil and RM28.1mil for FY20, FY21 and FY22.

• CBHB’s income is mainly derived from 4 segments: (i) construction; (ii) property development; (iii) property investment & management; and (iv) concession arrangement. Refer to Exhibits 1 & 2 for FY18 breakdown.

• The construction business comprises mainly infrastructure and building works of residential developments, healthcare amenities, infrastructure, leisure amenities, educational facilities and commercial developments. CBHB bagged several contracts worth more than RM500mil in the past 12 months. Presently, the remaining order book stands at RM1.24bil (Exhibit 3), indicating stable income for the next 2–3 years.

• For the property development division, CBHB is planning a mixed commercial development, namely Latitud8, a JV project with Prasarana Malaysia. Building on top of the Dang Wangi LRT station, the project has a GDV of about RM1.1bil and is scheduled for launching in 2H2020. CBHB is also planning another mixed development in Kelana Jaya, comprising retail units, serviced residential suites and offices. The project has a GDV of about RM1.0bil and is targeted to be launched in 2021.

• CBHB acquired a piece of land measuring 2.646ha (6.54 acres) in Bukit Tinggi, Klang in December 2019 for RM55.0mil. It plans to build residential apartments worth an estimated RM450mil in GDV with its launch scheduled for 1QFY21.

• The company has two investment properties – The Crest and Tierra Crest. The Crest is located in Seksyen 19, PJ while Tierra Crest is in Kelana Jaya. Both properties are receiving RM8.0mil and RM9.0mil of yearly rental respectively. CBHB also manages a concession (51% stake) of the 5,000-student capacity UiTM Tapah 2 campus with the Ministry of Education and Universiti Teknologi Mara (UiTM).

• We believe the CBHB’s medium-term outlook is positive, anchored by several construction wins in the past few months while the upcoming launches will be one of its major earnings contributors beyond FY21. CBHB also has stable income from a concession arrangement. Moreover, we believe the value of its investment properties deserves more attention. The stock is currently trading at an undemanding forward PER of 4.6x– 6.4x for FY20–FY22. This offers a potential upside of more than 100% and a dividend yield of 4.5%.

Source: AmInvest Research - 12 Mar 2020