Guocoland at 6-year high on undervaluation, shares seen overbought

KUALA LUMPUR: Guocoland (M) Bhd rose as much as 14%  to a record intraday high in more than six years yesterday, as investors perceived the property developer’s shares as undervalued.

The stock increased 25 sen to RM2.02 in intraday trade, its highest since March 12, 2008, Bloomberg data showed.

It ended the day 17 sen or 9.6% higher at RM1.94, with 27.1 million shares done. Its market capitalisation stood at RM1.36 billion.

“The market is hungry for trading ideas at the moment and investors are looking out for under-researched counters like Guocoland,” an analyst told The Edge Financial Daily yesterday.

The comments followed a recent Kenanga Research report, which indicated that Guocoland shares were undervalued versus the property developer’s revised net asset value (RNAV) of RM5.89 a share.

Kenanga Research analyst Sarah Lim said then Guocoland’s RNAV was driven by revaluation on its land bank, investment property, and inventory value to market prices.

“We derive an RNAV of RM5.89 and assume a steep 50% discount (higher than our average discount applied on developers of 31%) to derive a target price of RM2.95. We recommend that investors buy on weakness as we strongly believe that Guocoland is severely undervalued.

“Our valuations are conservative as we are opting for land-driven RNAVs rather than assuming full development value of each land bank,” Lim said.

Bursa Malaysia had on July 31 this year queried Guocoland on its share trading activity.

This article first appeared in The Edge Financial Daily, on August 13, 2014.