What Happened?

PGF, via its 50.1%-owned indirect join venture company, has entered into a sales and purchase agreement to acquire two parcels of freehold land, measuring an aggregate area of approximately 9.6 acres located at Kulim HighTech Park (KHTP) from Kulim Technology Park Corporation for a cash consideration of RM12.7mn and a consideration in kind, which will be funded via internal fund and borrowings.

The land is earmarked for a mixed-use development with a GDV of RM600mn, comprising condominium, hotel, serviced residence and several commercial elements. It will be developed in two phases over a six-year period after the completion of the land acquisition exercise by early-26.

Our View

We like this land deal as it would not only increase and diversify PGF’s earnings, the successful penetration into KHTP is expected to bring about more land deals and business opportunities in the future. Recently, the CEO of Kulim Technology Park Corp, Datuk Zahil Zabidi, was quoted as saying that the developer is thinking of plans to strengthen the surrounding ecosystem of KHTP and is collaborating with housing developers for residential development as well as bringing in a well-known hotel brand to accommodate the needs of the investor flow for the park. More importantly, KHTP would double its total area to 12,000 acres from 5,557 acres currently, with the development of a new industrial park a.k.a. KHTP 2.

According to management, Phase 1 with a GDV of RM300mn is targeted for lunch in FY27. We are optimistic on the take up rate as there is a ready catchment area as up to 2,161 acres of the industrial land at KHTP, comprising industrial zone Phase 1, 2, 3 and 4 are fully leased. In terms of land cost of approximately RM30psf, it is reasonably cheap if compared to the listing price ranging from RM38-60psf (iProperty).

Forecast

We raise our FY27 earnings projections by 6.3% to factor in the contribution from property development in Kulim. As at 2QFY25, the company has a total net cash of RM17.2mn, which is more than sufficient to pay for the land as well as the proposed 2sen dividend for 2QFY25.

Valuation

We upgrade PGF’s sum-of-parts valuation (SOP) to RM3.00/share (from RM2.76 previously) (Figure 1) with a ESG rating of , after incorporating the new property development projects into our valuation. Maintain Buy

Source: TA Research - 11 Dec 2024