News  Yesterday, Benalec announced that its wholly-owned subsidiary Orientalcove Property Sdn. Bhd. has entered into a Conditional Sale and Purchase Agreement with Ultra Harmony Development Sdn. Bhd. to dispose 6 pieces of leasehold land totalling 30.0 acres in Klebang, Melaka for a total consideration of RM51.0m.

Comments  We were not surprised with the land sales as we were expecting more than 60.0 acres of land sale by Benalec in FY14.

 The total sale consideration of RM51.0m translates to a sale price of RM39 psf, 30% higher compared to its previous land sale price of RM30 psf. The book value of these lands stood at RM38.7m or RM29.60 psf as at 30 June 2012. Benalec will record approximately RM9.2m in net profit from this particular land disposal which is expected to be reflected in FY14.

 However, the profit contribution is slightly below our expectations as the land cost of RM29.60 psf for these 6 parcels of land turned out to be 18% higher than our earlier assumption of RM25 psf.

Outlook  We are still waiting for more positive development on its Johor land reclamation project, which has yet to get any approval on its Environmental Impact Assessment (“EIA”) studies, and we hope that Benalec would be able to conclude its Johor project before the expiration of the time extension on 11^th Dec 2013.

Forecast  No changes to our earnings estimate.

Rating   Maintain OUTPERFORM

 We are maintaining our OUTPERFORM call on Benalec at this juncture, given that they could still possibly benefit from the development of its Johor project in Tanjung Piai, and we are also expecting more land sales in Melaka.

Valuation  Our SOP-based Target Price of RM1.94 is maintained at this juncture.

Risks to Our Call Further approval delays for the EIA studies for its Johor project

 Sharp increase in material prices

Source: Kenanga