News    Yesterday, Benalec announced that its wholly-owned subsidiary Heritage Land Sdn Bhd has entered into a sale and purchase agreement with Highbond Capital Sdn Bhd and Gigayear Revenue Sdn Bhd for the disposal of 8 pieces of leasehold land in Klebang, Melaka for a total consideration of RM54.3m.

Comments    We were not surprised by the sale as we had already anticipated 60 acres of land sale by Benalec in FY14. 

The total sale consideration of RM54.3m translates to RM30 psf is 7% higher compared to its previously transacted land sale price of RM28 psf. The book value of these lands stood at RM44.9m or RM24.8 psf as at 30 June 2012. Hence, Benalec is expected to gain approximately RM7.0m which will be reflected in FY14.

However, this profit contribution is below our expectations as the land cost of RM24.8 psf for these 8 parcels of land turned out to be 64% higher than our assumption of RM15.1 psf. 

Outlook   Nonetheless, we still believe that the long-term prospect remains intact for Benalec given that they are likely to benefit from the development of its land in Johor due to the sharp appreciation of land and property prices in that region.

Forecast   We revised our FY14 earnings lower by 14.6% from RM131.3m to RM112.2m to factor in the higher land cost for its Melaka land. 

Rating   Maintain OUTPERFORM

Valuation    Following our revision on its FY14 earnings, we trimmed our SOP-based TP marginally from RM2.08 to RM2.01.

Risks   Further delays on its EIA

Sharp increase in material prices

Source: Kenanga