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Bandar Raya Developments Bhd (AmResearch) maintain hold; fair value RM1.94

BANDAR RAYA DEVELOPMENTS BHD

• Bandar Raya Developments Bhd (BRDB) recorded net losses of RM0.7mil in its 3QFY10 thus taking its 9MFY10 core earnings to only RM23mil. This is way below our and consensus estimates, covering only about 18%-20% of our numbers. No dividend was declared during the quarter.

• The weak results can mostly be attributed to the lack of new launches from property development, with Troika and CapSquare Office Tower 2 being handed over this year. Also there were some RM1mil losses incurred by its associate company. YoY earnings slid by 77% on the back of a 33% decline in turnover.

• In the next 12 months, the group intends to develop seven to eight projects with a combined GDV of RM2.8bil. These projects include 6 CapSquare, Straits View Residences (Permas Jaya), CapSquare North and South Tower, condominium units in Segambut and Bukit Bandaraya and villa units in Taman Duta.

• We are cautious about the take-up for condominium units especially for 6 CapSquare and Segambut mostly because of demand saturation of such units in the KLCC and Mont’ Kiara areas. We understand the take-up rate for 6 CapSquare has reached 35% at an average pricing of RM900- RM950psf.

• However its planned development in Bukit Bandaraya (121 units) could see a good reception given its strong branding presence in Bangsar, with the lack of new supply within the area and only 500 over units to be supplied there in 2011 versus 3,000 units for Mont’ Kiara in 2011-2012.

• Elsewhere, we are positive about the recent JV with Country Heights for the planned development in Bluwater Estate mostly because of the high demand for the guarded and gated concept and its favourable location where it is connected by four major highways such as MRR2, North South Highway and SILK.

• Secondly, this new landbank would reduce BRDB’s earnings risks as its projects are mostly focused on developments that are plagued with oversupply concerns i.e. high-rise residential units in KLCC and Mont’ Kiara/Dutamas and office buildings.

• We are keeping our estimates at this juncture but with a downward bias pending a meeting with the management. Our HOLD rating is maintained with our fair value of RM1.94/share under review.
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