If you found it is extremely difficult to get an undervalue company with huge upside,then i think you was just overlooked Landmark Berhad(1643).

Landmark was a wellness resorts developer and operator.Before i start to share how undervalue landmark was,alow me to explain the business nature of Landmark.

Resorts development was a challenging but interesting business.I use the word "challenging" because it take time to develop and it was capital intensive,place and value proposition also very important as it will influence resort's yield directly.

But,when all these challenge been solves,the resort should become attractive and turn into a quality asset that will bring in stable cash flow,bad debt risk is low since most transaction done with cash.

Another attractiveness of resort business was operating margin can be lucrative.Generally,a fully developed and well-managed resort could easily achieve more than 15% Net Margin,this was due to fixed cost constitute biggest part in cost structure,such as employee expenses and depreciation charge,so when income generated enough to set off fixed cost,subsequent income should contribute significantly to the profit and margin.

For example,you owned a 100 rooms hotel,the hotel incur RM100k of employee expenses,RM30k of depreciation charges,and RM20k of other necessary expenses like water and electricity and maintainance per month,the room rated at RM100 per night.

Even you coundn't rent out any single room in a particular month, you still need to inccur RM150k(100+30+20) fixed cost ,so net loss for the month will be RM 150k.But,if the hotel able to achieve 20% occupancy rate,then you will earn RM60k revenue in a month,make your net loss narrow down to RM90k.

When 50% occupancy rate achieved,your Hotel will break even cos you will receive RM150k per month from guests and use it to cover all the fixed cost.

At 70% occupancy rate,then you will earn RM60k profit per month,this is because you received RM210k from guests but only have to use RM150k to cover fixed cost.With revenue of RM210k and profit of RM60k,your margin will be 30%,attractive isn't?

As you can see,when break even point is achieved,subsequent income will contribute significantly to bottom line and margin,This is the beauty of resort business.

Landmark berhad owned two resort at the moment,which is The Andaman at Pulau Langkawi and the new Flagship project name Treasure Bay Bintan at Bintan Island.In term of land size,the latter was 25x bigger than the former,provided huge development and commercial potential with more than RM12 billion GDV.

The Andaman was a well established resort,it maintain occupancy rate of above 75% for many years,the resort able to generate RM70-80million revenue and more than RM12 million profit every year,and it is the main contributor to landmark's result at the moment.

However,if we talk about future potential and upside of Landmark berhad,Treasure Bay Bintan is the one that you should really focus on,that's because this project alone can make Landmark become a billions worth company.

Treasure Bay Bintan was a huge integrate resort project that take place at an 338 hectare land.Located next to Bintan Ferry Terminal,the project's development works started by year 2010,and open to public by early 2016.Since the opening of Treasure Bay Bintan,Landmark berhad had suffer widen losses due to high fixed cost involved.

But as we can see from Landmark's financial report,revenue contribution from Treasure Bay Bintan keep raising sharply,thats because product offering was increasing and development activities been ramping up steadily at Treasure Bay Bintan,visitors to Bintan enjoying strong growth also a big boost.

As a result,operating losses keep narrow down and with current products portfolio,Treasure Bay was actually very close to break even point which is extremely crucial to any new resort.

Like what we explained above,when income generated from a resort enough to cover all the fixed cost,subsequent income will contribute significantly to profit and margin,and Landmark is not too far from the sweet spot.

Even we talk about land value alone,Treasure Bay Bintan already Valued at RM1.9billion 9 years ago,4x higher than landmark's current market cap,and bear in mind that Landmark had invested more than RM250million into Treasure Bay Bintan till date and successfully transform part of the land into income generating asset like The Canopi and Crystal Lagoon,so the value of Treasure Bay keep raising with time.

So when i talk about landmark berhad,i am not talking few hundred million but billions Ringgit worth of business.When fully develop,Treasure Bay alone should generate atlease RM400 million recurring income per year,and able to unlock billions of land value via strategic tie up or land sales,enjoy massive profit.

If you developed and operated an integrate resort at Bali or Phuket 20 years ago,today the asset will generate incredible return for the past 10 year and you will very rich.Why?of course it is due to Bali and Phuket was amongst the most popular tourism hot spot within SEA,visit by millions of traveler year by year,so resort operators who enter the market earlier was all very happy now.

Now,the same success story already started at Bintan Island and Landmark Berhad as well, since Landmark Owned big piece of golden landbank in Bintan.

Genting Berhad acquired 30% of landmark share in year 2007, reason behind the investment was clearly because of Treasure Bay Bintan.Probably you don't know,Genting was Paid more than RM2.00 for every Landmark's  share at that time,even Landmark not able to perform financially for the past 7 year,Genting doesn't sell any single share till now,its clearly means Genting still waiting for something big.

Landmark only traded at 83 cen at the moment;i have to said investors who buy Landmark at current price was very lucky,not only avoided the most challenging period of Landmark,the price you paid to buy Landmark's share was even 60% discount to what Genting paid for,and only 0.23x of Landmark's NTA, consider very safe since operating Statistic of Landmark Berhad is improving strongly and return to black was an expected event in 2018.Timing was just perfect.

Cheers and Happy New Year;）