Stock Name: TA
Company Name: TA ENTERPRISE BHD
Research House: HWANGDBS

TA Enterprise Bhd
(Dec 15, 77 sen)
Maintain buy at 76 sen with revised target price of RM1.25 (from RM1.30): The Greater KL Plan under the Economic Transformation Programme (ETP) aspires to transform the city into a vibrant economic hub and place it in the Top 20 most livable cities in the world. And TA Enterprise (TAE), which owns seven acres of prime land in KL, is one of the key beneficiaries given the scarcity and rapid rise in prime land prices. TAE's plan to launch projects with potential RM2.6 billion gross development value (GDV) in the KL prime area is intact.

Average daily trading value and volume soared to RM1.5 billion (+36% quarter-on-quarter) and 1 billion (+40%), respectively, in 3Q10, and almost doubled TAE's broking income in 3QFY11. Income from hotel operations grew 84% driven by strong occupancy rates at Swissotel. However, 9MFY11 net profit of RM49 million fell short of our estimate as we were too bullish on its hotel and property divisions. Hence, we cut FY11/13F earnings per share by 26% to 42%. Our forecast for the broking division is intact, and we believe trading momentum is sustainable given the slew of structural changes taking place at Bursa Malaysia that are aimed at improving trading interest and liquidity. Bursa's year-to-date-November 2010 average daily trading value of RM1.4 billion was ahead of our CY10F assumptions of RM1.2 billion.

We reiterate our 'buy' recommendation with our sum-of-parts-based target price reduced to RM1.25. Our TP is based on a SOP value, that is earnings before interest and tax for broking based on FY12F and overall launch pipeline still intact in spite of some deferment. Consolidation in the broking industry could stir interest in TAE. It has a strong retail franchise with 7% market share of trading volume. Its current valuation is attractive at 0.8 times book value. The market is assigning zero value to its cash-generating broking business, plus a 24% discount for TA Global given its implied market cap of RM1.7 billion against TAE's RM1.3 billion. ' HwangDBS Vickers Research Sdn Bhd


This article appeared in The Edge Financial Daily, December 16, 2010.

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