TA Enterprise; Buy; RM0.59
Price Target: RM1.10; TAE MK

TA Global (TAG), 73%-owned subsidiary of TA Enterprise (TAE) together with Birkbeck Trust will jointly develop a high-rise mixed project consisting of hotel and residences in Vancouver, Canada. Datuk Tiah Thee Kian who is the Executive Chairman of TAG is the ultimate beneficiary of Birkbeck Trust. The Proposed Joint Development consists of a 8 level underground parkade and a 64- storey building comprising a 4 level podium and a 60-storey point block which will house the hotel of approximately 161 guest rooms with supporting amenities such as restaurant and lounge, bar and pool, gym, spa and approximately 249 units of residences. The development is adjacent to the existing 24-storey triple-A rated corporate office building owned by TAG. Construction is expected to commence by the third quarter of 2012 and complete by 2016.

The estimated gross development value is C$496.4m (c.RM1.5bn) and total development cost (including land cost of C$110m) is approximately C$359.8m (c.RM1.1bn). Total financial commitment for TAG  works out to be C$185m (c.RM560m), which will be financed via internal funds and external borrowings.

Assuming 50% is financed via external funds, this would raise TAE's net gearing to 0.4x from 0.3x, which
is still manageable. This project will add another RM750m (+11%) to TAG's existing RM7bn GDV. At this juncture, we do not expect any impact on FY12-13F earnings (FYE-Jan). There should be potential earnings upside for our FY14F. Depending on the timing and sales value of the initial launch, we are keeping our FY14F unchanged for now.

Maintain Buy and our RM1.10 SOP-based TP is based on 45% discount to RNAV for property and 0.8x BV for broking. We believe the successive launches of TAG's property projects both in Malaysia and overseas, will be a catalyst for earnings traction and valuation lift.

Source: HwangDBS Research 15 March 2012