We  welcome  CMS’  strategic  disposal  of  500  acres  of  land  in  Bandar Samariang as this may give rise to a net capital gain of >MYR30m. The buyer’s proposed  theme  park  is  likely  to  add  value  to  CMS’  remaining landbank  and  spur  interest  on  its  upcoming  property  project  in Samariang.  We  reiterate  BUY  on  CMS,  with  an  SOP-based  FV  of MYR7.55, implying a 13.2x P/E and 1.5x P/BV based on FY14 estimates.  

- Selling  off  500  acres.  Last  Friday,  CMS’  wholly-owned  subsidiary, Project Bandar Samariang, entered into two separate sale and purchase agreements  (SPAs)  with  Sentoria  Group  (SNT  MK;  Not  Rated)  to dispose  of  two  tracks  of  land  in  its  Bandar  Samariang  township  –  200 and 300 acres for MYR17m and MYR30m respectively. SNT will develop the  first  tract  into  Borneo  Samariang  Resort  City,  which  will  comprise  a water  park,  resorts,  a  centre  for  meetings,  incentives  conferences  and events (MICE), a river cruise recreational center, a brands village, and a safari  park.  An  adjoining  300  acres  is  earmarked  for  residential  and commercial development.

- Adding value to Bandar Baru Samariang. We welcome the land sale, which we had anticipated in our 20 March 2013 initiation report entitled, Set to SCORE. Prior to this disposal, CMS had 4,211 acres of remaining landbank  in  Bandar  Samariang  with  a  total  book  value  of  merely MYR13m. We believe  the  disposal  will  give  rise  to  a  net  capital  gain  of >MYR30m  upon  fulfilling  the  terms  stipulated  under  the  SPAs.  More importantly,  the  transaction  marks  a  milestone  since SNT’s proposed theme  park may  enhance  the  valuation  of  CMS’ remaining landbank as well as spur interest on its upcoming Samariang Phase II.

- Reiterate  BUY.  Meanwhile,  we  make  no  changes  to  our  projection  as the land disposal in Bandar Samariang has been largely accounted for in our  financial  model  –  at  MYR20m  each  for  FY13  and  FY14.  Moreover, the timing of recognition from this disposal remains uncertain. That said, we  credit  Management  for  continuously  creating  value  for  the group’s property  division.  We  reiterate  our  BUY  recommendation  on  CMS  and FV of MYR7.55, derived from an undemanding SOP valuation.  

Source: RHB