News

ULHB has disposed 12.5 acres of land in the private marina precinct of Puteri Harbour (PH) to Southern Marina (Figure #3) for RM182.0m. Southern Marina intends to develop a mixed residential and commercial development on the said land (GDV TBA). Financial impact

Net profit contribution from this deal: RM81m.

We had previously factored in RM300m in land disposals for FY13E. This deal has caused YTD land disposals to reach RM583m, which has exceeded our estimates by 94%.

YTD land deals now make up 23% of our FY13E revenue estimate of RM2.56bn.

Pros / Cons

Rapidly rising land prices… PH, being the flagship zone of Nusajaya due to its prime waterfront location, is now enjoying rapidly rising land prices. We note that the RM334 psf pricing for this disposal is significantly higher than the blended average pricing of RM211psf for its Commercial North disposals in Jan 2013 and the RM210 psf that Mah Sing paid for its 8.19 acres of land in Medini in Oct 2012 (now known as Meridin).

Accelerating the PH skyline… ULHB clearly intends to fast-track the development of PH by roping in reputable developers with deep pockets, such as the Jan 9th disposal of 18ha of freehold land in Nusajaya for RM400m to Liberty Bridge Sdn Bhd. Similarly, Southern Marina has 70% shareholding by the Kuok Group and Robert Kuok, which we believe constitutes a plus point for future sales of the new development.

Retaining control… The land disposal is clearly strategic in nature, and not merely for disposal gains, as the agreement clauses state that any development undertaken by the Purchaser must be in compliance with PH’s Urban Design Guidelines, and that construction works for Phase 1 of the development must commence no later than 24 months from the completion date of the SPA.

Risks

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

Forecasts

Given the higher margin of the land disposal (60% GP margin) and that YTD land disposals have exceeded our estimates by 94%, we have raised our FY13 EPS forecast by 18% accordingly.

Rating

Maintain HOLD.

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

Valuation

• Maintain TP at RM2.85 (10% discount to RNAV).

Source: Hong Leong Investment Bank Research - 23 Apr 2013