Scientex announced that the group has completed acquisitions of 5 parcels of land in Kuala Langat, Selangor, measuring 250.8 acres for a total cash consideration of RM207.6mn (RM19.0/sf). The balance of the 90% (RM189mn) purchase price has been made to the vendor. Downgrade Scientex to Sell with unchanged target price of RM3.89/share.

Land Acquisitions in Kuala Langat, Selangor

To recap, these parcels of land in Kuala Langat are c.20km away from Klang town and c.11km away from Banting town. These parcels of land are easily assessable through South Klang Valley Expressway (SKVE) via Teluk Panglima Garang, and the upcoming Westcoast Expressway (WCE), which is connected to Banting interchange and is currently nearing completion at 96% (Appendix 1).

Price Appreciation to the Land

Based on the proposed acquisition date in 2021, the proposed acquisition price was at RM19.0/sf. However, we understand that the agricultural land prices in both locations have appreciated by c.40%, with a pricing range of approximately RM21/sf. - RM32/sf., as indicated by information from PropertyGuru and iproperty website.

Affordable Freehold Properties With Prime Development

Scientex has a target to build 50,000 affordable homes throughout the nation by 2028 and these acquisitions are aligned with the interest of the group. As at December 2023, the group has completed 32,975 homes.

These parcels of land are earmarked for a mixed-property development project. No estimated GDV guidance was provided by the management. In our forecast, we project the potential GDV of the land to be c.RM1.0bn, based on Scientex’s past projects with a similar land size of 200 acres.

Impact

We made no changes to our earnings forecast. The capex of RM207.6mn is within our projected capex for land purchase in FY24 (c.51% of FY24’s forecast for capex of land). After this land purchase, Scientex’s FY24 cash balance is expected to remain healthy at RM129.3mn with estimated net gearing of 0.2x.

Valuation

We maintain Scientex’s SOP valuation at RM3.89/share. However, we downgrade the stock to Sell (from hold) following the recent increase in share price.

Source: TA Research - 12 Jan 2024