IJM Land Disposes Of Aeon Bandaraya Melaka

Share Price : RM2.16
Fair Value : RM3.11
Recom : Outperform (Maintained)

? RM64m disposal gains. IJM Land is disposing of its retail property Aeon Bandaraya Melaka to ADF Tiger III Ltd, a Bermuda-incorporated foreign fund, for RM66.3m cash (plus debt of Aeon Bandaraya Melaka, we believe, taking the cue from the property’s net book value of RM319.4m as at 31 Mar 2010). IJM Land expects to record RM64m gains from the disposal, translating to 5.8sen/share.

? Positive. We are positive on the deal that is in line with IJM Land’s strategy to continuously develop, nurture and eventually unlock value of its investment properties. Proceeds from the disposal are estimated to reduce IJM Land’s net debt and gearing of RM845.4m and 0.51x (including advances from IJM but excluding RCULS) as at 31 Mar 2010 to RM462m and 0.28x.

? Risks and concerns. The risks include: 1) competition from peers; 2) surge in raw material costs; 3) delays in launches and approvals; and 4) country risk.

? Forecasts. Maintained as our forecasts exclude one-off gains.

? Maintain Outperform. Indicative fair value based on RNAV is raised by 2% from RM3.06 to RM3.11 to reflect the gains from the disposal (see Table 2). We continue to like IJM Land for: (1) Its strong net profit CAGR of 66% between FY12/09-12; and (2) It being a good proxy to the upturn in the local property market.