Dijaya gains investor interest

KUALA LUMPUR: Dijaya Corp Bhd seems to be attracting more attention as investors start to appreciate its low price-to-book valuations and aggressive strategies to ride the current property upcycle.

Long ignored by institutional investors, the stock was in the limelight after the entry of Cayman Islands-based TAEL One Partners Ltd as a substantial shareholder with a 5% stake last Monday. Last Friday, July 8, TAEL acquired another 10.25 million shares, bringing its total shareholding to 33 million shares or 7.25% equity interest.

The property developer, best known for its development of Tropicana Golf and Country Resort, has been receiving enquiries from analysts and funds after the purchase of 36ha of land in Subang in June, said managing director Datuk Tong Kien Onn.

"They see value in us especially with the counter trading below its net asset value," he told The Edge Financial Daily. "They see the potential in the company and it is becoming more aggressive with a slew of launches coming up."

UOB KayHian said in a report last week that it was positive on the company after meeting Dijaya's management. The research house expects Dijaya to be aggressive in landbanking activities especially in Johor and possibly Penang, and noted its strong pipeline of new launches in the coming months with an expected gross development value (GDV) of RM839 million.

Tong said the piece of land in Subang is a strategic one and there have been a lot of inquiries from prospective customers on its development, adding that Dijaya hopes to develop it early next year.

In a recent interview with The Edge, Tan Sri Danny Tan, Dijaya group CEO and younger brother of Berjaya Group chairman Tan Sri Vincent Tan, said Dijaya planned to build a mixed residential and commercial development with an expected GDV of RM2.5 billion on the tract, which borders Subang Jaya and Shah Alam.

The land was acquired from Taiwanese Chunghwa Picture Tubes (Malaysia) Sdn Bhd (CPT) for RM385.5 million.

According to an analyst, assuming Dijaya gets a margin of about 20% for the Subang project, it would result in a profit of about RM500 million over the tenure of the development, which would contribute significantly to Dijaya's bottom line.

Apart from the land in Subang, the property developer also plans to launch projects totalling RM3.5 billion in GDV over the next two years to drive growth.

In the pipeline are serviced apartments in Tropicana Danga Bay in Iskandar Malaysia Johor, the Tropicana Gardens commercial centre in Petaling Jaya and the Tropicana Bayou mixed development in Balakong, Selangor.

Dijaya's stock hit a 10-year high of RM1.71 last Monday. It closed one sen lower at RM1.58 last Friday.

Despite the run-up, the stock was still trading at 22.77% below its net assets per share of RM2.02 as at March 31, 2011.

Dijaya had net cash and equivalents of RM36.01 million as at March 31, 2011 with a large landbank as well as investment properties that include The Tropicana City Mall in Petaling Jaya.

The analyst noted that the prime land where the Tropicana Golf and Country Resort and Damansara Indah Resort Homes are sitting on is reflected at a very low price in Dijaya's books.

According to its 2010 annual report, it has some 6ha of land left for development in Tropicana Golf and Country Resort, valued at RM10.09 million or RM15.44 psf.

In Tropicana Indah Resort Homes, Dijaya has some 8ha left for development with a book value of RM4.75 million or just RM5.65 psf.

A check with property listings shows that the bungalow land in Tropicana Golf and Country Resort had asking prices of around RM320 to RM380 psf, while in Tropicana Indah, it is going for RM280 to RM300 psf.

The property analyst estimates that if the total 14ha Tropicana landbank is valued at RM250 psf, it could be worth RM373.53 million, compared with an estimated book cost of about RM14.84 million.

With 455 million shares issued, the analyst estimates that the potential revaluation gains of RM358.69 million from these two key assets alone are worth 78.8 sen per share on top of Dijaya's current book value of RM2.02, which places its revised net asset value closer to RM2.81.

It is worth noting that the potential revaluation gains do not include the 4.3ha of land in Tropicana Indah and 5.4ha of land in Tropicana Golf and Country Resort which are already being prepared for project launches and construction, and have similar low land costs.

The company's other landbank is also understated, including its Kajang and Cheras land acquired several years ago, while it has substantial investment assets such as The Tropicana City Mall and the Tropicana Golf and Country Resort golf course.

The emergence of TAEL Partners as a substantial shareholder in Dijaya and the run-up in the property developer's share price is a reflection of growing investor interest in the company, which has long been undervalued and below investors' radar.

UOB KayHian said it does not discount the possibility of more substantial shareholders aligned to the group's vision in institutionalising the company emerging going forward.

Dijaya's founder Danny Tan has a dream for the company to have a market capitalisation of RM2 billion to RM3 billion.

After surging 53.4% year-to-date and about 40% in the past month alone, Dijaya's current market capitalisation stands at RM719 million.

That's still a long way to go — although the company's new-found rigour and more aggressive strategy may help.

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