Dijaya to launch RM1.6b projects

PETALING JAYA (Mar 8): Dijaya Corp Bhd, which is growing its size with the injection of new assets, aims to launch some RM1.6 billion worth of projects this year.

UOB Kay Hian said in a note on Wednesday a 10% to 15% earnings growth at Dijaya over the next two years is "achievable" given the healthy unbilled sales of close to RM600 million.

"Its recurring income alone will deliver about RM40 million in 2013, which accounts for 46% of FY11 estimated pre-tax profit," said the research firm.

The house noted that on the back of 340ha landbank with a potential gross development value (GDV) of RM36.6 billion, Dijaya is a larger player now. This compares to S P Setia Bhd's potential GDV of close to RM55 billion. It noted that the company targets to launch properties worth RM2.6 billion and RM2.8 billion in 2013 and 2014 respectively.

The projects in the pipeline this year are within its flagship Tropicana project in Petaling Jaya as well as in Subang, Cheras, Johor Bahru and Penang.

This includes the RM1.8 billion Tropicana Gardens commercial centre, which features products such as SoHo units and service apartments. On Tuesday, the company announced that it is acquiring major shareholder Tan Sri Danny Tan's assets worth some RM1.1 billion.

The purchase consideration was some RM945 million, to be satisfied via RM250 million cash and the remainder via redeemable convertible unsecured loan stocks (RCULS).

Dijaya has also proposed a rights issue to facilitate the exercise and a separate debt fundraising worth up to RM500 million in capital expenditure and working capital.

Post injection of the assets, the company will have a market capitalisation exceeding RM1 billion.

At over RM1 billion market capitalisation, Dijaya is comparable with companies such as Selangor Properties Bhd (RM1.3 billion) and Bandar Raya Development Bhd (RM1.12 billion) but smaller than Eastern & Oriental Bhd (RM1.84 billion) and Mah Sing Group Bhd (RM1.89 billion).

Dijaya's move to beef up its asset base follows the initiative of other bigger players such as UEM Land Holdings Bhd and Sunway Bhd to strengthen their portfolios and increase market capitalisation by merging entities.

Upon completion of the exercise, Dijaya's landbank will increase to 340ha with potential GDV rising from RM30 billion to RM37 billion.

The amalgamation will increase the net lettable area of Dijaya's investment properties to 1.4 million sq ft. UOB is positive on the corporate exercise as the revised net asset value (RNAV) per share after the asset injection could range up to RM5.48.

It noted the fully diluted RNAV per share is about RM2.66, after including full conversion of the rights, RCULS and bonus shares.

Tracking the broader market selloff, Dijaya's shares ended 18 sen lower at RM1.49 on Wednesday with almost 22 million shares traded. The stock began trading on Wednesday after being suspended since 4.35pm last Friday for the announcement of the corporate exercise.

"The upside potential appears decent given that current market capitalisation is only RM767 million," said UOB.