In a recent write-up, we highlighted KSL Holdings Bhd as a hidden gem in Malaysia’s property market. Today, we revisit KSL to explore why this company remains an underdog with substantial potential, especially given the latest developments in Johor’s data center market.

KSL Holdings Bhd: Current Standing

KSL Holdings Bhd continues to show strong financial health and operational success. For the year 2023, KSL nearly doubled its revenue to RM1,142 million from RM575 million in 2022. The pre-tax profit also saw a significant increase to RM535 million, up from RM217.2 million the previous year​​. This substantial growth underscores KSL’s ability to navigate market dynamics effectively and maintain a solid trajectory of expansion.

Johor: The New Data Center Hub

Johor has quickly become Malaysia’s largest data center market, driven by significant investments and strategic developments. Recent reports highlight major projects, such as Gamuda’s RM1.7 billion hyperscale data center contracts and Sime Darby’s new data center outside Kuala Lumpur. These developments position Johor as a critical hub for technological infrastructure, enhancing the region’s economic landscape.

KSL’s Strategic Advantage

While KSL Holdings may not be directly involved in the AI boom or the data center industry, its significant property holdings in Johor place it in a unique position to benefit from this surge. The influx of data center investments is likely to drive up property demand in the region, benefiting real estate players like KSL.

Johor’s growing prominence as a data center hub can spur increased residential and commercial property demand. KSL’s extensive projects in Johor, such as Taman Bestari Indah, Taman Mutiara Bestari, and KSL Residences 2, are poised to attract new investments and higher property valuations. These strategic locations offer easy access to major highways and urban amenities, making them attractive for potential buyers and investors​​.

Undeveloped Property Holdings in Johor

KSL’s land bank in Johor is one of its most valuable assets. Highlighting undeveloped properties is crucial as these lands have not yet had their prices set, which could result in higher valuations in the future. Here are some key undeveloped properties:

Land in Pulai, Johor:

A substantial portion of KSL’s 190-acre mixed development township in Pulai remains undeveloped. This land offers potential for future residential and commercial projects.

Unutilized Land in Skudai:

Beyond the current developments, KSL holds significant land reserves in Skudai. This area, close to key amenities and major highways, is ripe for future development.

KSL’s Holdings in Johor Bahru:

KSL owns various plots of undeveloped land in Johor Bahru. As the city grows and infrastructure improves, these lands are likely to increase in value, offering excellent prospects for new projects.

Future Development Sites in Segamat and Batu Pahat:

KSL also has undeveloped land in Segamat and Batu Pahat. These regions, known for their strategic locations, present opportunities for future residential and commercial developments.

These undeveloped properties highlight KSL’s extensive footprint in Johor, providing a substantial foundation for future growth as the region develops further. Since these lands have not yet been priced into the market, their future developments could lead to significant value appreciation.

Projected Stock Price Based on Peer Valuation

Based on the average P/E ratio of its peers (34.49), the projected stock price of KSL Holdings Bhd would be approximately RM14.49. It’s important to note that this projection is based on current earnings and the average P/E ratio of similar companies in the market. This valuation does not factor in potential future developments that could further enhance KSL’s market position.

Imagine the Potential

While we prefer not to speculate, it’s worth considering the significant potential upside if KSL Holdings Bhd were to announce involvement in the fast-growing data center sector. Given the already strong valuation without any direct involvement in the AI boom, such a strategic move could propel the stock even higher, aligning it more closely with the rapidly growing tech infrastructure sector in Johor.

Suppose you buy 1,000 shares of KSL at the current price. KSL’s price is low compared to its earnings and other similar companies.

If you buy 1,000 shares of KSL at RM1.84 = RM1,840

If the price goes up by 50% (close the P/E gap) = RM7,250

That is more than double your money.

Conclusion

KSL Holdings Bhd remains an undervalued player in Malaysia’s property sector. With its strong financials, strategic projects in Johor, and the region’s rapid development into a data center hub, KSL is well-positioned for significant growth. Investors looking for a promising property stock should consider KSL as a potential addition to their portfolio.

Disclaimer: This information is for sharing purposes only and does not constitute investment advice. Market conditions can change rapidly, and it is important to conduct thorough research or consult with a financial advisor before making investment decisions. Always invest prudently.

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