• Property developer with pure exposure in Klang Valley

• Owner of prime land in Jalan Ampang

• Hua Yang Berhad emerged as largest shareholder recently

• Neutral earnings prospect

• Initiate coverage with Neutral and TP of RM1.59

Property developer with pure exposure in Klang Valley. Magna Prima has over 32 acres of landbank in Klang Valley where 25 acres of the land is located in Shah Alam. Besides, Magna Prima is having 6.96 acres of landbank along Jalan Gasing in Petaling Jaya. Collectively, the landbank is having remaining GDV of >RM2.2b which provide the Company with 5-7 years of earnings visibility.

Owner of prime land in Jalan Ampang. Magna Prima owns 2.6acres of prime land in Jalan Ampang, which is located in the Golden Triangle of Kuala Lumpur and is close to Petronas Twin Towers. Magna Prima has been reportedly putting up the Jalan Ampang land for sale. Based on the latest book value of RM382m of Jalan Ampang land, we estimate Magna Prima to potentially realize disposal gain of >RM200m should the sale go through.

Hua Yang Berhad emerged as largest shareholder. Hua Yang Berhad emerged as Magna Prima’s largest shareholder in April 2017 after raising its stake in Magna Prima to 30.06% from 10.84%. We are positive on entry of Hua Yang due to potential synergies between the two companies considering the similar property exposures in Klang Valley. Besides, we expect Magna Prima to leverage on Hua Yang’s expertise in developing affordable housing.

Neutral earnings prospect. We forecast FY17 earnings of Magna Prima to be lower at RM7.2m (-38.6%yoy) due to completion of larger scale projects such as The Istana and The Avare in FY15-FY16. Nevertheless, we expect earnings of Magna Prima to recover from FY18 onwards as we anticipate earnings to be driven by sales from its new property projects in Shah Alam.

Initiate coverage with Neutral recommendation and TP of RM1.59 based on 20% discount to fully-diluted RNAV. Initiate with Neutral recommendation due to its neutral earnings outlook. Potential catalysts could emanate from value unlocking of Jalan Ampang land either in the form of sale of land or development plans for the land being ironed out.

Source: MIDF Research - 22 Jun 2017