Do you notice that something is brewing in Benalec where the volume has been increasing recently?

The stocks breakout on 4th December 2020 since thereafter, the volume unusually high compared to previous week.

Source: https://asia.nikkei.com/Business/Transportation/Canceled-10.5bn-Malaysia-port-project-plays-down-China-role

In late November authorities cancelled the land reclamation contract awarded to KAJ Development after four years of "no development," leaving doubts as to how long it might be before the hoped-for stream of ships and commercial traffic shows up.

Local media Utusan Malaysia quoted Malaccan Chief Minister Sulaiman Ali as saying the Melaka Gateway project will not be abandoned but will be taken over by a new developer. "The development will continue, but we have some technical issues that we need to fix," he was quoted as saying.

Why Benalec?

In 2003, Benalec secured another first with the award of a large-scale reclamation project involving 180 acres of reclaimed land in Klebang, Malacca. This has since led the group to have a hand in several other reclamation jobs within the state.

Strong Presence in Melacca and Experience on Previous Reclamation Project

Malacca The Malacca Structure Plan 2020 has designated the coastal areas of this historic state as priority development areas for massive land reclamation activities. Along with Georgetown (Penang), Malacca was in 2008 inducted among the world’s heritage sites by UNESCO. To this effect, the Malacca government has approved land reclamation activities between Kuala Sg. Linggi and Sg. Merlimau. The gazetted area measures 2,835 hectares (~7,005 acres), with an estimated cost of RM6.3bil. Development within these areas is regulated by the state government. Among others, at least 10% of the reclaimed site must feature a waterfront park – with one-sixth of the total reclaimed area to be allocated to the state government. Currently, projects within the Klebang area are already underway – where Benalec is involved in some of the ongoing projects. This puts the group in a strong position to bid for additional contracts – where at least 1,805 acres within this area are being reclaimed from the sea. To date, the land portion secured by the group as payment-in-kind is ~296 acres against a total contract sum of RM176mil. This translates into an effective land cost of ~RM14/psf against the current market value of ~RM25/psf for comparable land within Malacca. Out of this total, the group has entered into agreements to dispose off ~59% acres for RM50mil – giving rise to an estimated gain on disposal of RM17mil.

However, we emphasise that land sales are only ancillary or a by-product of Benalec’s operations. Its core operations very much remain entrenched in marine construction activities.

Company Structure

So why Benalec rise? Price move before news out? To be continue...

This is for information sharing and please consult for your broker for any call or sell call decision.