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AVALAND: Transforming From Strength to Strength - KingKKK (Intrinsic Value 46 sen, 57% upside)

KingKKK
Publish date: Fri, 01 Mar 2024, 03:52 PM

A. How much is AVALAND worth? 46 sen by using average P/E and P/B method (53% upside)

On average, property stocks in Malaysia trade at average Price/Book (PB) of 0.82x or Price/Earnings (PE) of 22.5x. The details is as below. Date of data captured is 29-Feb closing.

Stock
PB
PE
Sunway
1.32
20.3
Mah Sing
0.64
10.5
UEMS
0.77
65.0
IOI Properties
0.57
16.0
Matrix  
1.04
9.0
SIME Properties
0.52
14.8
Average
0.81
22.6
Avaland (at 30 sen)
0.48
4.2
A1. P/E Method = 43 sen

By using PE method, Avaland is worth 43 sen. The 6x PE is based on 75 % discount to peers average as their market cap is smaller. I also estimate 2024 EPS to grow 57% to 7.1 sen.

PE Method
Value
Note
Fair PE
6x
75% discount to peers average
EPS for 2024
7.1 sen
Q42023 already make 2.58 sen
Intrinsic Value (sen)
42.6

A2. P/B Method = 50 sen


By using PB method,   Avaland is worth 50 sen. The 0.77x PE is based on 10-year average P/B for the stock . I also estimate 2024 Book Value to increase slightly against latest value of 64 sen.


PB Method
Value
Note
Fair PB
0.77x
10-year average
Book Value for 2024
65 sen
Latest book value is 64 sen
Intrinsic Value (sen)
50.1

A3. By averaging both I get 46 sen Intrinsic Value for Avaland.

PE Method
42.6
PB Method
50.1
Average
46.3


B. Q4 earnings confirmed the turnaround is working



Q4-2023
Q4-2022
Change
Revenue
261.65
76.55
241.8%
Gross Profit
90.57
46.43
95.1%
Profit Before Tax
46.517
11.25
313.5%
Net Profit
37.522
13.506
177.8%
EPS
2.58
0.93
177.4%





2023
2022
Change
Revenue
608.25
224.92
170.4%
Gross Profit
210.17
93.08
125.8%
Profit Before Tax
92.606
-4.724
Turnaround
Net Profit
64.236
7.092
805.8%
EPS
4.53
0.03
150 times

In Q4-2023, AVALAND EPS grew 177% against Q4-2022 to 2.58 sen. 2023 EPS is even more powerful as it surge 150 times to 4.53 sen. The reason behind the strong earnings growth which doubled in 2023 and tripled in Q4-2023. The improvement in revenue was supported by higher sales recognition and advanced construction work progress from ongoing projects in addition to sales of completed  units. 

We can see from the Quarterly trend and Annual trend below that the turnaround strategy has worked well and is still progressing with more to come. These are from KLSE screener.

Quarterly revenue and net profit trend


Annual revenue and net profit trend



C. Other notable achievement in Q4 2023

1. Sales increased 7.6% to RM586m in 2023.

2. Unbilled sales jumped 20% to RM863m.


D. Future growth plan

1. Plans to launch three new projects namely Amika Residences, Aetas Seputeh and Anja Bangi with a total GDV of RM1.4 billion.


Anja Bangi - Residential project at Bangi, price below RM600,000



Amika Residences - middle price range RM600,000 - RM800,000 per unit

Picture of Amika from Avaland website as below.


Aetas Seputeh - Luxury segment

Picture of Aetas Seputeh from Avaland website as below.



E. Property sector outlook is positive in Malaysia

Strong Demand for Affordable Housing: Government initiatives like the full stamp duty exemption and increased allocation for the Housing Credit Guarantee Scheme are expected to bolster demand for affordable housing, benefiting developers who focus on this segment.

Resilient Industrial Segment: Malaysia's position as a manufacturing hub and the growing e-commerce sector are driving demand for industrial properties, offering opportunities for investors in industrial REITs or developers with strong industrial portfolios.

Potential Uptick in Foreign Investment: The revised MM2H program could attract foreign investors, creating potential demand for specific property segments, particularly in prime locations.


F. Background

Avaland Berhad, formerly known as MCT Berhad, is a property development company listed on the Main Market of Bursa Malaysia Securities Berhad since 2015. The company's vision is to be an Innovative & Timeless Value Creator. They aim to create communities and enhance lives for generations by providing a complete lifestyle experience. Avaland Berhad has won numerous awards including The BrandLaureate Property Brand of The Year Awards 2022 and The Edge Malaysia's Best Managed and Sustainable Property Awards (BMSPA) 2023.

Landbanking:In addition to securing a 4.02-acre site in Bangi in 2022, Avaland made its debut in Kuala Lumpur in 2023 through the acquisitions of 1.57 acres and 3.9 acres of land in Seputeh and Taman Desa, respectively.

In addition to securing a 4.02-acre site in Bangi in 2022, Avaland made its debut in Kuala Lumpur in 2023 through the acquisitions of 1.57 acres and 3.9 acres of land in Seputeh and Taman Desa, respectively.


Some of the videos related to Avaland are as below:


ALORA RESIDENCES, SUBANG JAYA: INSPIRED LIVING WITHIN GREENERY (youtube.com)


Aetas Damansara l Luxury Home in Persiaran Tropicana (youtube.com)


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