- We maintain our BUY call on Benalec Holdings at an unchanged fair value of RM0.95/share. This pegs the stock at a 55% discount to our NAV estimate.

- The Malay Mail reported over the weekend that several development projects in Malacca could be in the offing.

- This includes the Federal approval for an additional RM180mil for the Malacca river beautification and rehabilitation project.

- Other potential catalysts include:- (i) proposal to expand the Malacca International Airport; and (ii) RM1.1bil coastal highway in the state.

- This comes amidst the recent endorsement by the cabinet of Malacca’s ‘twin state’ status with Guangdong City, the capital of Guangdong province in China.

- Earlier reports indicated that both cities are looking to forge closer collaborations in the fields of economy and tourism.

- If followed through, this latest development certainly bodes well for Benalec’s land concessions in Malacca, which has seen more tourism-related investments in recent years.

- We estimate the group to have ~240 acres of land inventories in Malacca and RM523mil in future land sales with SPAs (287 acres) that are awaiting the issuance of land titles.

- The most recent sale is in Klebang (70 acres) for RM129mil (~RM42psf), which could translate into a net gain of RM34mil by the first quarter of 2016.

- Once realised, these transactions could help provide some degree of earnings visibility to the group over the next two years.

- More importantly, we expect Benalec to commence initial reclamation works at its Tg. Piai concession this month.

- At the same time, the group is set to step-up discussions with potential offtakers which previously expressed interest to buy portions of ~1,000 acres that was originally earmarked for 1MY Strategic Oil before the deal lapsed in June.

- The sealing of a maiden offtaker will go a long way towards narrowing the deep discount of 71% that Benalec is trading at vis-à-vis its NAV.

Source: AmeSecurities Research - 3 Aug 2015