Stock Name: BOLTON
Company Name: BOLTON BHD
Research House: HWANGDBS

Bolton Bhd
(Aug 11, 95.5 sen)
Maintain buy at 98 sen with target price RM1.50: Bolton is buying 23 acres of leasehold land (99 years) in Ukay Perdana, Kuala Lumpur, for RM72 million or RM72 psf. Although this is higher than recent transactions of RM40 to RM50 psf, it is fair because the land comes with a development order and substantial earthworks have been done.

Bolton plans to amend the layout to 92 semi-detached units and six bungalows, instead of 184 semi-detached, terrace and townvilla units, to ride on the strong demand for gated and guarded high-end landed developments in the area. The acquisition is expected to be completed by 4QFY2011.

Based on RM220 million gross development value (average selling price: RM2.2 to RM3 million per unit) and RM45 million GDV, the project should boost FY2012/13F earnings by 16% to 35% and realised net asset value (RNAV) by eight or 3% (development over three years).

Assuming 80% debt financing for the land, net gearing will only increase to 24% from 10% currently (Bolton recently secured a RM195 million debt facility).

With strong bookings for 6 Ceylon and Arata@Kenny Hills, Bolton's unbilled sales should triple to about RM400 million from RM133 million. Bolton is in a good position to accelerate launches and replenish its landbank, including participating in government land redevelopment in the Klang Valley (there is a scarcity of bumiputera developers with a track record in high-end development). Valuation is attractive at 62% discount to RNAV and 0.7 times P/BV, against small/mid-cap developers' average of 45% and 0.8 times respectively. ' HwangDBS Vickers Research, Aug 11


This article appeared in The Edge Financial Daily, August 12, 2010.