News

MCHB has entered into SPA with a number of related parties for the sale of 13 shop units in its commercial development known as Sendayan Metropark for a total of RM16.5m.

The proposed transactions are expected to take 36 months to complete.

Comment

While the total size of the transactions (RM16.5m) is not large (less than 5% of total assets), we are somewhat taken aback at the number of RPT taking place.

Nonetheless, the price range for the RPT properties appears reasonable (RM460-750 psf). A quick check with other similar shop office properties in Seremban shows an asking price range of RM300-900 psf.

Given the relatively small overall size of the transaction and the reasonable pricing, we believe that impact is minor.

Risks

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

Forecasts

Maintained, as we have factored in sales of its commercial properties into our earnings forecast.

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).

However, given the recent strong performance in share price, we also note that the upside is now relatively smaller, but still remains a buy at this juncture as total return is still expected to be more than 10%.

Source: Hong Leong Investment Bank Research - 28 Apr 2014