Compulsory Land Sale In Parts Of Subang Parade

THE BUZZ
The government has compulsorily acquired 0.328 acres of land from Hektar REIT for the proposed extension of the Kelana Jaya Light Rail Transit (LRT) Phase 2 project located in
Subang Jaya for a compensation amount of RM4.16m (or RM290.85psf). However, AmTrustee, the Trustee for Hektar REIT has filed an appeal on the compensation amount.

Under the Land Acquisition Act, 1960, 75% of the sum awarded will be paid to AmTrustee Berhad (on behalf of Hektar REIT) within 6 weeks from the date of service of the Notice of Award on AmTrustee Berhad, pending the outcome of the appeal. (Bursa)





OUR TAKE
Where is it? The acquired land forms part of the 10.905 acres on which the Subang Parade Shopping Centre is located and which belongs to Hektar REIT. The acquired portion is merely 3% of the abovementioned land area and affects a part of the outdoor car park area of the building, right in front of Parkson (see the roughly indicated area shaded in light red in Figure 1 and 2, based on management’s guidance).

Fair price? Management of Hektar REIT does not wish to comment on whether it reckons the price to be paid by the State Government for the land is fair. Since an appeal has been filed on the compensation amount, it appears the Trustee must have reckoned that the land deserves to be valued at more than RM290.85psf.

Loss of car park income negligible. Although we are unable to estimate any potential loss of car park income when the part of the land is eventually given up to the government, management has assured us that any impact will be very negligible.

No impact to the supposed upcoming development adjacent to the mall. The compulsory land disposal does not involve another supposed piece of undeveloped land adjacent to the Subang Parade, which the management has the intention of developing it in the near future into an incomegenerating asset to boost the trust’s earnings for the long-term.

Overall, neutral on the deal. Cash proceed from the land disposal could potentially be distributed back to the unit-holders in the form of special dividend, which is estimated to be a maximum of 1.3sen/share or a gross yield of 1.1% based on current price. Otherwise, impact to Hektar’s earnings and prospect is negligible. As such, we are maintaining our earnings forecast and our call for now.

Maintain BUY based on its still attractive CY10 dividend yield of 9.4% with a fair value of RM1.29.