Journey to Wealth
Malaysia Building Society - Disposing an Abandoned Mall
BUYFAIR VALUE: MYR2.70
THE BUZZ
Malaysia Building Society (MBSB) announced on Bursa Malaysia that it has entered into a conditional sale and purchase agreement (SPA) with WCT Hartanah Jaya SB, a subsidiary of WCT, for the disposal of a commercial land together with an abandoned shopping mall located in Tebrau, Johor Bahru at a purchase consideration of RM180m.
OUR TAKE
Details of the proposed disposal. The proposal will involve the disposal of a commercial land measuring approximately 50,107 sq m, along with a vacant four-level retail mall with two levels of car park. The property is located at a matured area of Johor Bahru, next to several townships namely Taman Johor, Taman Bukit Mewah, Taman Dato Penggawa Barat and Taman Sutera Utama, and along Jalan Skudai, a linkage between the North-South Expressway and Johor Bahru City Center. The total purchase consideration for the fair market value of the land and the abandoned mall together amounted to RM180m.
Cash proceeds to be utilized for working capital. In the announcement,MBSB plans to utilize the expected proceeds amounting to RM180m for the enhancement of MBSB's core financing business segment. MBSB estimated that the proposal will result in a gain on disposal at the Group level of approximately RM55m.
7-9bps potential dividend yield upside based on our projection. Assuming the disposal exercises of Gadini SB (announced on 18 July), which was expected to generate a gain of disposal of RM6.75m, and the commercial land and the abandoned shopping mall materializes,MBSB expects to recognize a total of RM61.8m. This will translate into an increase in its earnings per share by about 4.37sen, based on our financial model (shares outstanding: 1.42bn shares). Assuming that the company decides to reward shareholders by paying out this gain in full as dividend, the stock's gross dividend yield would increase from 5.4% to 6.3%, based on our projections. We are keeping our FY12-13 forecasts unchanged as the disposal is a non-core item.
Maintain BUY. After disposing of Gadini and the commercial land, MBSB would still own nine properties with an estimated book value of RM238.4m, which any of it can be monetized in line with the group's objective to dispose of its non-income generating assets, foreclosed properties and properties acquired previously. Please refer to the next page for the details of the Group's property schedule. We maintain our BUY call, FV unchanged at RM2.70, pegged to 2.6x PBV, assuming a 4.0% growth rate, COE of 11.0% and ROE of 23.7%.
Source: OSK
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