Share
BANDAR RAYA DEVELOPMENTS
Investment Highlights
• We reaffirm our HOLD rating on Bandar Raya Developments (BRDB) with our fair value revised to RM2.20/share based on a 35% discount to our revised NAV estimate – as we include new projects and roll forward our valuation to FY11F - of RM3.40/share. Our HOLD rating is maintained due to unexciting launches and lack of positive newsflow.
• BRDB reported earnings of RM20mil for 4QFY10, thus taking its FY10 net profit to RM126mil despite recording a massive drop (-31% YoY) in revenue of RM626mil. However, strippingoff the fair value gain of RM83mil from the revaluation of Bangsar Shopping Centre, BRDB turned in core earnings of RM43mil (-65% YoY).
• The lower earnings came about from the weaker contribution from its property development unit – EBIT dropped by 58% YoY to RM78mil. Last year saw the completion of One Menerung and Troika while earnings for FY10 were mostly driven by progress billings from CapSquare Tower 2.
• However, this was offset by the property investment and manufacturing units, both reporting profits versus losses in the corresponding period last year. Property investment unit was boosted by the completion of BSC’s refurbishment with stronger rental rates of around RM10psf while Mieco was boosted by stronger sales of value-added products, lower raw material costs and costs-cutting initiatives.
• We understand that 6 CapSquare Residences, one of the few launches last year, has so far seen only a 57% take-up with ASP of RM800psf. We are not surprised that the take-up rate is lacklustre given that there is already demand saturation for luxury high-rise condominiums within the KLCC vicinity.
• For 2011, the group is planning to launch close to RM2bil worth of properties.
(1) Kiara North condominiums
(2)Taman Duta low rise luxury apartments priced at RM1,200psf;
(3) 2-blocks of strata-titled office towers in CapSquare (GDV:RM278mil);
(4) Bluwater at Mines Resort – Semi-Ds
• While there is ready end-user demand for high-end projects such as Tmn Duta and Bluwater, we are concerned about the take-up for:
(1) the two office blocks in CapSquare and
(2) Kiara North - given the soft office and condo market in KL and Mont Kiara/Segambut respectively.
• We gather from the management that the group is targeting to complete the MOU with MPHB – for the development of land bank in Rawang, Gombak and Penang – by 1H2011. Wehave not factored in anything until deal is inked.
