Fitters Diversified; Buy
Price Target: RM0.95; FIT MK

Fitters announced that it has entered into 2 separate sale and purchase (S&P) agreements with Ebic Development Sdn Bhd for a total purchase consideration of RM9m:

• I) Acquisition of 100% in Rasa Anggun Development Sdn Bhd (RADSB) for RM1m
• ii) Acquisition of 100% in Superior Villa Sdn Bhd (SVSB) for RM8m

RADSB has recently acquired a 50-acre land in Rawang for RM32.7m (implying RM15psf) in Nov12. The balance 90% purchase price of RM29.4m is still pending and will be paid by Fitters. It is envisaged that the project will carry an estimated GDV of RM300m.

SVSB has also entered into a JV with Koh Yuet Thye@Kwo Yueh Mui, the owner of a piece of land in KL. A development order has been granted for the proposed development of a condominum which has a GDV of RM154m.

The total acquisition consideration comes at RM44.7m which will be comfortably financed by its net cash position. We expect Fitters’ net gearing to rise to 17% upon completion of both proposed acquisitions. We are positive on the deal as the proposed projects will ensure its earnings visibility after completion of its maiden property project, ZetaPark@Setapak by FY15.

We maintain our Buy rating on Fitters with SOP-derived TP of RM0.95. The proposed merger and IPO of its fire-fighting business with its Singaporean partner, Deluge Fire Protection (SEA) Pte Ltd will be strong rerating catalysts for FIT. Valuations are attractive with the stock trading at only 5.5x FY14 EPS currently.

Source: HwangDBS Research - 28 May 2013