News

• MCHB’s wholly-owned subsidiary, BSS Development Sdn Bhd (BSSD) has acquired 15 pieces of vacant agriculture lands in Mukim Labu, Negeri Sembilan, measuring in total 79 acres for RM27.5m (or RM8 psf).

• The proposed acquisition is to beef up the industrial land bank of the group as an extension to the existing Sendayan Techvalley (STV) to sustain continuous development in Seremban.

Highlights

• The acquisition is not a surprise as it is in line with MCHB’s growth strategy in strengthening its foot stay in Seremban.

• The land is located in Bandar Sri Sedayan (BSS) and would further enhance the appreciation value to the properties within the vicinity.

• Development on the land could commence this year and it would further complement and extend the lifespan of Sedayan TechValley (STV) in BSS. Despite no mention on the timeframe of the development, we believe it would likely be completed in 2 years and ready for sale, similar to its STV 1 & STV 2.

• Pricing-wise, we deemed the purchase price of RM27.5m to be fair as it was price equivalent to the market value evaluated by the independent valuer.

• With nett sellable area of approximately 75% of the land and estimated GDV of RM110m, the ASP is RM42.62 psf. We view the ASP to be fairly reasonable with potential for further appreciation as compared to current market value, which are ranging between RM30-50 psf.

• MCHB’s balance sheet remains healthy despite paying entirely through internally generated funds for the proposed acquisition with very low gearing level of 0.01x. This would allow ample room for the group to carry out any potential landbanking activities going forward before hitting the 0.5x level.

Risks

• Slowdown in sales;
• Escalation in construction;
• Raw material costs; and
• Downturn in Seremban and Johor.

Forecasts

• Maintained.

Rating

BUY

Positives

• : Offers great exposure to the thrivingsatellite town of Seremban.

Negatives

• : Lack of landbank diversification means thecompany’s fate is completely tied to that of Seremban.

Valuation

• Maintain TP of RM3.30 (30% discount to RNAV), which implies FY15E P/E of 7.9x. This remained undemanding vs. mid to large-cap peers who are currently trading at 12-18x. Maintain BUY.

Source: Hong Leong Investment Bank Research - 13 Mar 2015