- We maintain BUY on Benalec Holdings with a lower sumof-parts (SOP) derived fair value of RM2.02/share (vs. RM2.48/share previously).

- The lower fair value is to account for the likelihood of:- (i) a weaker 4QFY13; and (ii) a shift in the timing of recognition from land sales in Malacca and Johor. Its 4Q results are scheduled to be released later today.

- We expect Benalec’s upcoming 4Q results to be lower (both on a QoQ and YoY basis), as the sales of two strategic pieces of land in Malacca would be recognised in FY14F instead of 2HFY13 as envisaged earlier.

- We estimate the gain on disposal from these two pieces of land at ~RM34mil. In addition, we have also shifted future recognition from its Johor projects to endFY14F/1QFY15F (previously: 4QFY13F).

- Overall, Benalec’s outstanding order book stands at ~RM263mil, mainly underpinned by the Sentosa Cove and Pulau Indah projects in Selangor and Malacca respectively. Reclamation works for the DMDI project in Malacca is also ongoing.

- At the same time, Benalec is on the lookout for order book top-ups. It remains open to job opportunities within a few key markets, including Iskandar Malaysia and Penang.

- But the main thrust for Benalec in the near term is still commercialising its prime seafront land concessions in South Johor totalling 5,485 acres.

- Notably, a firm decision on a binding term sheet signed between Benalec, 1MY Strategic Oil Terminal Sdn Bhd (1MY) for the sale and reclamation of 1,000 acres of land in Tg.Piai, Johor is expected to be known by year-end.

- While the timeline of this deal has been pushed back, its investment merits and dynamics remain firmly entrenched. Hence, securing its first landmark deal is pivotal, as it would act as a trailblazer to galvanise Tg.Piai’s status as a future oil hub.

- Likewise, we have only incorporated 2,000 acres of its Tg.Piai concession into our earnings model, accounting for ~RM1.21/share or 60% of its SOP. There is another 3,245 acres of land held under Benalec’s concession agreement in South Johor.

- This suggests some scope for future valuation upgrades when its Johor projects gain momentum.

Source: AmeSecurities