Benalec  Holdings  (BHB)  announced  that  its  indirect  wholly-owned subsidiaries  have  entered  into  the  following  sale  and  purchase agreements:-1)  with Quality Paradise, a wholly-owned subsidiary of Jadex Land, to dispose  of  all  six  pieces  of  reclaimed  leasehold  land  located  in  Pekan Klebang,  Melaka  measuring  approximately  39.27  acres  for  a  cash consideration of RM71.8m (Land Disposal 1); and 2)  with Jadex Land to dispose of  all three pieces of leasehold vacant land which will be reclaimed located in Pekan Klebang, Melaka measuring approximately  19.36  acres  for  a  cash  consideration  of  RM35.4m  (Land Disposal 2).

Land Disposal 1 and Land Disposal 2 are expected to generate profit after tax  of  RM18.8m  and  RM9.3m  respectively.  Subject  to  fulfillment  of conditions  precedent,  including  the  issuance  of  land  titles,  the  proposed disposals are expected to be completed in 4Q15, i.e. in FY06/16. (Source: Bursa Malaysia)

Comment:  A positive development while the group wait for the outcome of the public comments on the Detailed Environment Impact Assessment for its Johor land reclamation concessions and subsequent commencement of reclamation works. The estimated total profit of RM28.1m from the two land disposals  would  amount  to  43%  of  our  FY15  core  net  profit  forecast  of RM66.1m  for  BHB,  are  already  factored  in  to  our  forecasts  and  hence enhances  earnings  visibility.  At  RM42  psf,  the  implied  valuation  of  the disposal  is  similar  to  the  proposed  disposal  of  128.5  acres  of  land  in Kawasan Bandar VI, Daerah Melaka Tengah, Melaka announced in Mar14.

We maintain our TRADING BUY rating for BHB with an unchanged target price of RM1.98,  which hinge on the commencement of land reclamation works on its massive land reclamation concessions in Tanjung Piai (3,485 acres) and Pengerang (1,760 acres).

Source: Affin Hwang Capital Research - 3 Dec 2014