Benalec Holdings - Latent value bottled up'waiting to be unearthed! BUY

kiasutrader

Publish date: Tue, 18 Sep 2012, 09:25 AM

- Maintain BUY on Benalec Holdings, with an unchanged fair value of RM2.48/share. A report by The Edge Weekly cited Benalec being confident of striking a deal to develop the first 250 acres of prime seafront land within the next few months in South Johor following the recent signing of a Development Agreement (DA) with the Johor government.

- Benalec is reportedly in negotiations with several foreign tank farm operators from the Middle East, Europe and China. In fact, Benalec may accelerate reclamation works at its Tg.Piai landbank by 2H13 with 500 acres ' doubling that of its present target ' if it secures two or three major offtakers.

- This latest news re-affirms our view that the latent value of Benalec's concessions in Johor is underappreciated.Firstly, the DA seals Benalec's exclusive rights to reclaim/ develop 5,485 acres of prime seafront land in Tg.Piai and Pengerang into a future oil hub.

- Secondly, and significantly ' there is already deep value attached to Benalec's highly-coveted DA. Just based on Benalec's 2,000 acres of land in Tg.Piai and a 25% discount to the market value of similar deals within this area, the implied value attached to Benalec's effective 70% entitlement rights in Johor is already RM900mil (RM1.14/share).

- Thirdly, The Edge Weekly added that Benalec's Pengerang landbank may be included in RAPID's masterplan. We agree, as together with Tg.Piai, Benalec's landbank ' with good sea frontage and close proximity to Jurong ' can actually complement RAPID by providing storage space to support the massive investments being lined up.

- Fourthly, Benalec is a cheaper entry to the repositioning of South Johor as an emerging oil & gas hub. The stock is trading at only 7x-10x FY13F-15F PEs vs. the oil & gas sector's 18x. We forecast contributions from this segment to reach ~64% of group EBIT in FY14F-15F.

- Fifthly, Benalec has the balance sheet (FY13F net gearing: 0.1x) to embark on this massive project, which requires upfront payment from buyers. Major shareholder in the Leaw family raised their stake in Benalec to 54.4% as at September 12 from 53.7% in May. This is backed by yields of 4.5%-6.3% on a minimum payout of ~30%.

Equally, there is scope for valuation upgrades as our forecast only assumes 2,000 acres of reclaimed land sales in Tg.Piai. Benalec's reclamation model provides the ideal platform to add more value via multiple channels as the development of its Johor landbank progresses (e.g. stakes in the tank farms, leasing and marine/logistical support).

Source: AmeSecurities

BENALEC (5190)

Related Stocks

Market Buzz

Discussions

Be the first to like this. Showing 3 of 3 comments

chongkonghui

Why the price still so so low??

2012-09-18 17:10

Karenng

Benalec is testing investors' patience. Just hand on to your steering before accelerating on the highway.

2012-09-20 15:56

ayub

going to be RM 1.10 soon.

2012-09-20 15:57

Featured Posts

MQ Trader

Introducing MY's First IPO Fund for Sophisticated Investors!

MQ Chat

New Update. Discover investment communities that resonate with your ideas

MQ Trader

M & A Value Partners IPO Equity Fund has been launched - Targeted 13% Return p.a

Latest Videos