News

NPSB (100% subsidiary of ULHB) has entered into: (1) a shareholders’ agreement with Iskandar Coast Sdn Bhd (ICSB) and ULHB to collaborate on an integrated development; (2) SPA with ICSB (80%-owned subsidiary of Iskandar Investment Berhad (“IIB”)) to acquire 63 acres of freehold land for RM48.1m; (3) SPA with BND (100% subsidiary of ULHB) to acquire 22.4 acres of freehold land for RM17.1m; and (4) a Shareholders’ Agreement where ULHB will transfer 20% of its equity stake in NPSB to ICSB for RM50k.

The 85.4 acres of acquisition land is intended to be combined with the existing 122-acre freehold land parcel which ULHB had acquired from Tanjung Bidara Ventures Sdn Bhd (“TBV Land”), to develop a major integrated residential development in Puteri Harbour. Financial impact

Uncertain due to lack of clarity on GDV and expected selling prices for the development.

Pros / Cons

More development synergies… The Proposed Acquisition is intended to complement the existing TBV Land by boosting ULHB’s land bank in the vicinity by 70% to 207 acres. We also believe that the greater size and flexibility (in terms of ability to design a more attractive master plan) will prove beneficial to overall GDV.

RM1.5bn GDV estimate… Based on ULHB’s previous guidance of RM7.5m GDV / acre for its East Ledang development, this could translate into circa RM1.5bn of GDV for the new development, which we believe is possible due to its close proximity to the waterfront zone of Puteri Harbour (Figure #3).

Reasonable land cost… The average land cost for this transaction is RM17.50 psf, which remains modest vs. the RM211 psf ULHB received for its land disposals in Commercial North in Jan 2013 and the RM210 psf that Mah Sing paid for its 8.19 acres of land in Medini in Oct 2012.

Risks

Nusajaya fails to hit critical mass; high-beta stock.

Forecasts

Maintained.

Rating

Maintain HOLD.

• Positives: highly liquid proxy to property sector; large war-chest for landbank acquisitions; rich in newsflow.
• Negatives: Share price is highly news-driven; vulnerable to external slowdown; highest P/E multiple in the sector (>2x sector average).

Valuation

Raise TP to RM2.85 (reduce discount to RNAV from 35% to 10%) given investors’ positive sentiment on Iskandar Malaysia and ULHB being the best proxy.

Source: Hong Leong Investment Bank Research - 17 Apr 2013