MK Land Holdings Bhd (May 9, 33 sen)

Maintain neutral with an unchanged target price (TP) of 35 sen: MK Land Holdings Bhd has entered into two sale and purchase agreements with KL Teh Land and Development Sdn Bhd for the disposal of nine parcels of leasehold land for RM72 million.

This comes as a positive surprise as we had expected the disposal of the group’s land bank in Perak to have taken longer time to monetise as compared with its land bank in the Klang Valley. We understand that the group is expected to record a net gain of approximately RM32.14 million on the disposal. Earnings are kept unchanged for now pending completion of the deal, which is only expected about 18 months from now.

The land deal consists of two sale and purchase agreements. Land 1 is six parcels of leasehold land in Mukim of Kamunting, District of Larut and Matang, Perak for RM9 million. Land 2 is three parcels of leasehold land for RM63 million.

Currently, the original cost for the land is RM5.65 million. We believe that Land 2 is where its Bukit Jana Golf Club is currently situated on as one of the condition precedents is the dissolution or wind-up of the club membership scheme, hence the 18-month time frame for the completion of the deal.

We understand that the group plans to use RM47 million as working capital and the remaining RM25 million for development expenses of ongoing and future projects. Net cash of the group is expected to increase to about RM122 million or around 10 sen per share upon completion of the deal. While positive, we are still of the view that its core earnings will remain weak in the near term with no meaningful new launches. Maintain “neutral” with TP unchanged at 35 sen, pegged at around 80% discount to our revalued net asset value estimate. — PublicInvest Research, May 9

This article first appeared in The Edge Financial Daily, on May 11, 2017.

For more stories, download pullout here for free.

  1. Sime Darby Plantation to co-develop Kerian Integrated Green Industrial Park with PNB
  2. Perak proposes new highway between Tanjung Malim and Lumut
  3. Epicon’s outstanding order book rises to RM929m with latest contract worth RM89m