Sentoria specialises in developing integrated resort townships with theme parks and affordable housing. Besides offering its own affordable homes, the company also provides government housing under PR1MA and Rumah SelangorKu. Its competitive advantage lies in its ability to acquire land at relatively low cost, and the company has been able to sustain a stable EBITDA margin of 20% or more since FY13. Its current trailing CY17 PER of 8x is relatively low compared to its peers.

Affordable Housing Focus

Sentoria offers affordable homes (90% of its housing products are priced below RM300k) under (i) government schemes (i.e. PR1MA, Rumah SelangorKu) and (ii) its own integrated resort townships. Group revenue is mainly driven by its property development division (85% of total in FY17). In-house affordable home sales contribute 58% of property development revenue with the balance of sales to government housing schemes.

Niche Developer

As a specialist in integrated resort city development, Sentoria offers the best of both worlds, i.e. affordable homes and entertainment (water theme parks, convention centres and safari parks). Owing to its successful project launches (>90% take-up rate) in Bukit Gambang Resort City (BGRC), the group has adopted a similar resort city model in Morib, Langkawi and Kuching. Properties in these townships are offered at relatively low prices because Sentoria is able to obtain these lands at a low cost or through joint development with their landowners.

High Unbilled Sales and GDV

Current unbilled sales stand at RM349m, equivalent to 1.3x FY17 revenue. In FY18, the group plans to launch property projects worth RM592m out of total remaining GDV of RM9.3bn. Its ongoing projects saw good average take-up rates of 89% with RM109m in sales achieved in 1QFY18 or 24% of its RM450m target sales in FY18.

Financials and Valuation

Sentoria achieved a 3-year net profit CAGR of 7% in FY14-17. Despite the weak property market, the company believes that the 20% EBITDA margin can be maintained given the strong demand for affordable housing in its key operating areas and its competitive advantage in being able to acquire land at relatively low cost. Sentoria’s current trailing CY17 PER 8x and Price/Book of 0.8x are at discounts to most peers.

Source: Affin Hwang Research - 17 Apr 2018