- We maintain BUY on Benalec Holdings with an unchanged fair value of RM2.02/share.

- Despite imputing a 15% discount to its revised Sum-OfParts (SOP) value, our fair value remains largely unchanged as we roll-forward our valuation base to FY14F. As a prudent measure, the discount is to reflect any timing risk associated with Benalec’s proposed oil storage projects in South Johor.

- Benalec’s FY13 results were well within expectations. FY13 net profit fell by 32% YoY largely due to a deferred recognition of two strategic land sales in Malacca to FY14F.

- On a sequential basis, 4QFY13 pre-tax profit fell by 55% QoQ to RM5mil.

- Apart from the delay of recognition for the two land sales highlighted above, there was also a net gain of RM4mil for the sale of a smaller piece of land (also in Malacca) that was recorded in the preceding quarter.

- Construction billings also slowed down due to lower recognition from the Pulau Indah project, and completion of the Swiss Horizon contract during the quarter.

- Benalec’s outstanding order book currently stands at ~RM263mil and is looking to top up as it moves into FY14F. It is open to job opportunities within key markets such as Iskandar Malaysia and Penang.

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

- Notably, all eyes would be on the group’s ability to crystallise its first offtaker at Tg.Piai - where a decision on its binding agreement with 1MY Strategic Oil Terminal Sdn Bhd (1MY) for the sale and reclamation of 1,000 acres is expected to be known by year-end.

- Our current valuation only incorporates 2,000 acres of its Tg.Piai concession into our earnings model, accounting for ~RM1.53/share or 64% of its SOP.

- We expect Benalec to declare a DPS of 2.5 sen (tax exempt) for FY13 (net yield of 2%) after its results, anchored by a minimum payout ratio of 30%.

Source: AmeSecurities