We raise our fair value to MYR3.30. We believe the Iskandar theme will dominate the property sector this year. Active landbank transactions in Iskandar are creating an angle for RNAV re-ratings. We see upside potential in ULHB’s RNAV given the implied landbank value of only MYR27 per sq ft. Our revised fair value suggests a more realistic implied value of MYR34 per sq ft. Other catalytic developments such as the MRT link and High-Speed Rail link are key drivers for property sales.

♦  Landbank transactions create angle for RNAV play, The potential listings of Iskandar Waterfront Holdings (IWH) and Medini Iskandar Malaysia, as well as the active landbank transactions in Johor will drive the Iskandar theme this year. Apart from the reputable regional players such as Ascendas, CapitaLand and Temasek, SP Setia’s Tan Sri Liew has also acquired over 1,000 acres of land in Iskandar recently under his son’s name. The value and prospect of Iskandar are assured by the strategic moves of this entrepreneur and other high-profile companies.

♦  Implied land price only MYR27 per sq ft. We see an upside in ULHB’s RNAV. Based on the current market cap and excluding the landbank outside Nusajaya, the implied land price for Nusajaya is only MYR27 per sq ft. Our revised MYR3.30 fair value suggests an implied land price of MYR34 per sq ft, which is more reasonable.

♦  Unprecedented level of support from Singapore. The Singapore story is powerful. The country’s favourable macro factors of low interest rate and strong currency, along with stubbornly high property prices, rising wages and tighter curbs on the property market, are the key factors that draw SMEs to relocate or expand. Support from the Singapore government on the MRT link and High-Speed Rail Link projects are a win-win effort to contain the property price growth in Singapore and accelerate the success of Iskandar. We believe ULHB will be able to hit its MYR3bn property sales target this year (vs. MYR2.46bn in 2012). 

♦  Trading Buy. ULHB is the must-own stock for Iskandar play. We raise our fair value to MYR3.30, at 15% premium to RNAV, in line with the previous sector upcycle valuations in 1H2011. Ahead of the polling of the general election, we reiterate our view that there is no turning back for the Iskandar development given the milestone achieved and various cross-border transactions. Any selldown will be a buying opportunity.

Source: RHB