- We maintain our BUY call on Benalec Holdings with an unchanged fair value of RM1.25/share, pegged at a 45% discount to its sum-of-parts value.

- Benalec announced that the group has entered into three separate sales and purchase agreements (SPAs) with Arena Progresif Sdn Bhd for the disposal of land in Malacca.

- The reclaimed land measures 70 acres in total, and is located approximately 9.5km southwest of Malacca city centre.

- The said land parcels are for commercial usage.

- The total consideration for the land disposals amount to RM129mil.

- Based on the estimated net book value of ~RM84mil, we expect Benalec to realise a net gain on sale of RM34mil, which is set to be recognised in FY16F.

- We make no changes to our earnings estimates as the latest land sale forms part of our land sale assumptions for FY16F.

- Benalec’s increasing prospects in Malacca fortify its position as a provider of prime sea-fronting land in the state, where there has been a pick-up in tourism-related activities over the years.

- The monetisation of its land concession in Malacca, in turn, should provide more earnings support to the FY15F- 16F net profit forecasts of RM48mil-RM50mil (FY14: RM33mil).

- On our estimates, this new land deal will bump up the group’s total land sales with SPAs to RM523mil (~287 acres) that are to be progressively recognised over the next three FYs.

- Furthermore, we do not rule out the prospects of more concessions in Malacca going forward.

- The key re-rating catalyst for Benalec remains with its aspirations to turn its concession in Tg. Piai into a future oil hub.

- While securing the DEIA approval would certainly provide more assurance of the project’s viability, the real challenge is to secure maiden off-takers during a period of declining oil prices.

Source: AmeSecurities