- Maintain BUY on Crescendo Corp with a fair value of RM3.50/share on a 45% discount to its NAV. We hosted a luncheon talk for Crescendo that was attended by local institutional funds yesterday.

- We came away from the luncheon with a more upbeat view of Crescendo’s surging prospects as a premier developer of industrial properties in Johor. Firstly, management foresees an imminent and stronger return of buying interest for properties now that the elections are over.

- Just last week, Crescendo has sold 4 out of the 28 completed industrial units worth RM220mil at Nusa Cemerlang Industrial Park (NCIP) at an average price of RM350psf. The number of enquiries – particularly from Singapore SMEs is also increasing.

- The timing is impeccable as the imminent entry of Singapore’s Ascendas into Gerbang Nusajaya (via a JV with UEM Land) – located next to NCIP – should accelerate the relocation of Singaporean SMEs to Johor.

- As such, we expect the balance of units to be snapped up pretty soon. This implies some upside bias to our net profit forecast of RM85mil for FY13F (+52%). We estimate that new sales achieved for 1Q13 was ~RM60mil or already close to 60% for the whole of FY11 (RM99mil).

- Another positive revelation is that yields for industrial properties within Johor are at decent 5%-6% based on average rental price of RM1.70psf. The group has set aside some 10%-20% of its remaining lanbank at NCIP (256 acres) for leasing.

- Management re-affirmed its RM1.2bil pre-sales aim for the next two years (~RM600m p.a or 3x FY11’s launches). New launches include the 1,390 acre Bandar Cemerlang (BC) township in JB, to be launched by 2Q14. The prime targets for this project are Johoreans working in Singapore; indicative pricing for landed units is ~RM400k-RM500k.

- Crescendo is on track to complete reclamation works on its 222-acre tract of prime sea-fronting land in Tebrau located close to the highly successful Senibong Cove. The project could kick-off in 2014, with management open to JVs to help accelerate its deep development potential.

- There are no immediate landbanking plans, unless the land has significant potential and is located close to its existing projects. Net yields remain attractive at 4%-6% based on the group’s minimum payout ratio of 30%. Despite its recent share price rally, the stock still trades at cheap FD PEs of 7x-10x against a steep 51% discount to its NAV.

Source: AmeSecurities