News

MCHB has proposed a bonus issue of up to 152.9m bonus shares on the basis of one bonus shares for every two existing shares.

The proposed bonus issue is expected to be completed by 3Q14.

As at Dec 2013, the issued and paid up share capital stands at RM301.2mm comprising 301.2m shares. In addition, there are approximately 4.59m of ESOS options exercisable by the entitlement date.

Comment

We are slightly positive on the proposed bonus issue as it will serve to enhance the liquidity and marketability of the shares.

Under the maximum scenario, the total share base is expected to enlarge to 458.6m shares based on the 1- for-2 bonus issue and full exercise of the 4.59m of ESOS.

Net asset per share is expected to adjust from RM1.83 to RM1.23 based on the enlarged share base of 458.6m shares.

Post the exercise, the ex-share price and ex-target price will be adjusted to RM2.70 and RM2.95 respectively.

Risks

Slowdown in sales; escalation in construction and raw material costs; downturn in Seremban and Johor.

Forecasts

Maintained.

Rating

BUY

Positives: Offers great exposure to the thriving satellite town of Seremban.

Negatives: Lack of landbank diversification means the company’s fate is completely tied to that of Seremban.

Valuation

Maintain TP at RM4.49 (35% discount to RNAV).

We continue to like MCHB on back of: (1) Our conviction that further upside remains thanks to escalating land prices in Seremban as more Greater KL residents continue to migrate to Seremban; (2) Undemanding FY15E PER of 6.4.x vs. more than 10x for mid to large-cap developers; and (3) Still attractive FY15E DY of 6.2%, based on 40% payout ratio.

Source: Hong Leong Investment Bank Research - 14 Apr 2014