Stock Name: DNP
Company Name: DNP HOLDINGS BHD
Research House: HWANGDBS

DNP Holdings Bhd
(Oct 5, RM1.78)
Maintain buy at RM1.72 with target price of RM2.25: DNP is seeking to ride on the 'Wing Tai' brand name. It is requesting shareholder approval at its annual general meeting in November to rebrand itself.

The rebranding exercise is a re-rating catalyst as DNP would be able to leverage more on parent Wing Tai's strong brand name, global marketing network, and institutional following. Wing Tai has started to buy DNP shares again after a hiatus of more than three years, acquiring 7.5 million shares (2.3%) on the open market since August to raise its stake to 55.8%. We believe Wing Tai sees deep value in DNP, given its attractive 0.7 times P/BV and 0.46 times P/RNAV against the sector's one time and 0.61 time, respectively. As one of the largest landowners around KLCC (4.9 acres), DNP will benefit from rising land values and the government's plan to turn Kuala Lumpur into a more livable and vibrant city.

We see the potential for strong earnings growth (three-year CAGR of 48%), supported by four high-end launches worth RM2 billion: (i) Verticas Residensi at Bukit Ceylon (Tower B: 15% take-up at RM1,100 psf; Tower A: 70% at RM950 psf); (ii) U-Thant condos (average selling price (ASP): RM1,100 psf, launch-ready); (iii) Le Nouvel luxury condos opposite Petronas Twin Towers/diagonally across from upcoming Four Seasons (ASP: RM2,000 psf, expected launch 2H11); and (iv) Sunway link and semi-detached houses (expected launch 1H11). We understand DNP has received approval to resume the development of Sering Ukay Phase 3 (semi-detached, bungalows), which has been stalled due to concerns over hillside projects (possible write back of RM37 million impairment charge booked in FY08 not factored into earnings).

DNP is actively seeking more land in the Klang Valley, facilitated by a strong balance sheet (almost net cash) and operating cash flows. Its investment property at Ampang, Lanson Place Condo 8 (three-acre tract), also has redevelopment potential. ' HwangDBS Vickers Research, Oct 5


This article appeared in The Edge Financial Daily, October 6, 2010.