Teladan Setia Group Bhd (TELADAN) is principally involved in property development, where the group develops and sells residential and mixed development properties in Melaka. As TELADAN is focused in the property development business itself, the group does not have any in-house contractors to carry out construction works. Over the years, TELADAN has grown and established its presence as a reputable residential property developer in Melaka who offers quality properties to its buyers. As at 23 Jan 2021, TELADAN has 20 completed projects with a total gross development value (GDV) of RM2.1bn, 3 on going projects with estimated total GDV of RM623.0m and 3 future projects with estimated total GDV of RM995.2m.

Moving forward, TELADAN intends to further strengthen its market presence as an established residential and mixed development property developer in Melaka with a focus on landed residential properties. In addition, TELADAN intends to expand its business through the acquisition of landbank for future projects in Melaka. We derive a fair value of RM0.53 based on a 10x PE multiple to its FY21F EPS of 5.3sen. The IPO is expected to raise approximately RM77.3m from the issuance of 161.1m new shares. Besides utilising 45.3% of the proceeds for acquisition of land for development, 42.8% of the proceeds are allocated as working capital for project development.

• Growth drivers. TELADAN’s growth will be dependent on: i) completion of the development of its on-going residential projects, ii) continuous acquisition of suitable landbank, and iii) commencement of the development of its future landed residential property development projects.

• Competitive strengths. TELADAN’s competitive strengths include: i) having a sizeable pipeline of on-going and future development projects, ii) having sizeable landbank in Melaka and Selangor for future developments, iii) having a proven track record in attracting property buyers, iv) putting great emphasis on developing quality properties, and v) having an experienced and hands-on key senior management.

• Catalysts. Key drivers may include: i) steady growth in Melaka population with increased GDP per capita, ii) relatively low interest rate environment, and iii) introduction of the National Home Ownership Campaign.

• Key risks. Key downside risks, among others, include i) competition in the property development industry, ii) dependency on the services of its contractors for completion and quality of its property development projects, iii) dependency on the prevailing market conditions in the property market, iv) dependency on the ability to secure adequate financing in a capital intensive business environment, and v) potential unanticipated increase in costs associated with property development projects.

Source: PublicInvest Research - 2 Mar 2021