-  Maintain BUY on IJM Land with an unchanged fair value of RM3.86/share - a 10% discount to its FD NAV. IJM Land announced that it had acquired a 60% stake in Asas Panorama Sdn Bhd (ASAS). The remaining 40% is held by Sino Development Ventures Ltd.

-  ASAS had on 5 December, entered into a conditional sale and purchase agreement (SPA) to acquire 67 parcels of land in Kuantan, Pahang for RM296mil. The said land is to be developed into a mixed development project with a strong emphasis on industrial properties.

-  The mixed development project has an estimated GDV of RM1.4bil with a development period of ten years (2014-2024). IJM Land should have no problems in raising funds for its share of the land purchase given its strong balance sheet.

-  The entire transaction is expected to be concluded by 4Q13 with another six months for the land purchase of ~RM25psf. We deem the effective land cost as fair as rapid developments are taking shape within Kuantan Port.

-  This latest land deal provides IJM Land with a ideal platform to expand its reach into the industrial property segment, besides diversifying its landbank geographically to include Kuantan.

-  IJM Land’s entry is timely, as parent IJM Corp is embarking on a RM3bil Kuantan Port expansion program with China’s Guangxi Beibu Group. Part of this involves the creation of a JV entity to co-develop the hinterland area surrounding Kuantan Port, which is to be housed under ASAS.

-  The ASAS land is suitably located just 5km away from Kuantan Port along the Gebeng bypass; 5km from Kuantan Town and within close proximity of the recently-launched Malaysia-China Kuantan Industrial Park (MCKIP). As such, the land is to be positioned as an extension to the current Gebeng Prime Industrial Estate in Kuantan.

-  Apart from financial muscle, news reports indicate that Guangxi Beibu will commit over RM7bil to kick-off MCKIP. The Kuantan Port expansion is part of this ambitious project. The MCKIP is aimed to secure investments of up to US$24bil by 2020. Key industries targeted include oil, electrical & electronics products, as well as car components.

-  More value will likely emerge from the ASAS land once Phase 1 of the Kuantan Port expansion is completed in two years. Supporting industries are required to support these planned investments.

-  We keep our fair value and earnings recommendation intact for now. Sino’s stake in ASAS would likely be acquired by Guangxi Beibu in the near future.

Source: AmeSecurities