Local research house AmResearch is positive on the stock, noting that the group is trading at a steep discount to its revised net asset value (RNAV), which will be boosted after the group's latest acquisition of prime land in Tanjong Tokong.
Trading at about RM1.05 currently, Ivory is valued at a discount of 61.1% to its RNAV of RM2.70 per share, according to AmResearch. Its forward price-to-earnings (PER) multiple — at less than four times — is attractive with EPS CAGR of 63%.
"Taken together, Ivory remains an excellent transformational growth story," AmResearch said in a report. AmInvestment Bank was the promoter of the initial public offering (IPO) exercise.
Ivory was listed in July, one of the few IPOs in 2010 that have yet to close below its initial offer price of RM1. The stock hit RM1.41 just three days after listing on July 29, while it saw a low of RM1.03 on Dec 29.
Ivory's acquisitions of land since its listing involved two tracts of prime land on Penang island.
In August 2010, the company bought prime sea front land measuring 1.1 acres in Batu Ferringhi for RM25 million. Then in September, it had proposed to buy all the remaining shares in Tanjong Tokong Garden Development Sdn Bhd for RM37.6 million. This opened the door for Ivory to develop a 2.3-acre tract of prime freehold land in Tanjong Tokong, where the take-up is expected to be strong due to its strategic location.
The land will be developed into an integrated lifestyle concept area called "City Mall". "City Mall" comprises 175 condominium units and a retail mall with a gross development value (GDV) of RM368 million. This development is expected to generate a lucrative pre-tax profit of RM154 million or a whopping margin of 42%.
"The latest acquisition underlines our confidence in Ivory's accelerated growth trajectory from several NAV-accretive land deals," said AmResearch.
Ivory presently focuses solely on developing premium residential and commercial properties in Penang, albeit it also has plans for future developments in Tanjung Malim, Perak.
Given its exposure to the Penang property market, there were some concerns that the group's sales would be affected if Penang's property market were to cool after the present "heat".
Penang Real Estate and Housing Development Association chairman Datuk Jerry Chan recently was quoted in news reports dispelling concerns on the sustainability of the uptrend in the Island's property market.
He said although the first three quarters of 2010 showed rising property prices, the demand has not diminished as buyers were not just limited to Penangites residing on the island, but also foreign buyers and buyers from mainland Penang (Seberang Prai).
According to a report from the National Property Information Centre (Napic), data for the first half of 2010 showed improved performance in Penang's property market against 1H09. There were close to 12,000 transactions worth RM4.09 billion recorded, representing an increase of 9.8% in volume and 37.3% in value against 1H09.
Residential properties dominated the transactions, with 70% market share while commercial properties accounted for another 11.3%.
"Generally, prices, rentals and gross yields of residential property in Penang were stable across the board," the report noted.
Ivory's steady growth is evident from its financial performance.
For the nine months ended Sept 30, its revenue of RM122.1 million has already slightly surpassed the whole of last financial year's RM121 million.
This was attributed to a higher percentage of completion for Phase 2 of Penang Times Square, while the Moonlight Bay project in Batu Ferringhi was completed in 3Q.
Net profit for the nine-month period rose 46% at RM25 million compared with FY09's full-year net profit of RM17.2 million.
Ivory held cash of RM27.56 million as at Sept 30, against total borrowings of RM100.04 million. Its net debt of RM72.48 million translated to a net gearing ratio of 39.9%, based on shareholders funds of RM181.47 million.
Year-to-date earnings per share totalled 16.5 sen while net assets per share stood at 98 sen.
The group had raised about RM45 million in gross proceeds from its public issue of 44.9 million new shares of 50 sen each.
In its prospectus, Ivory said it had completed about 24.8 acres of development with a total GDV of RM675.6 million, with RM834.1 million of ongoing projects. It estimates the GDV of its future projects at RM1.9 billion.
Some of its completed projects are established buildings in Penang such as Phase One of Penang Times Square, Birch The Plaza condominium and shopping complex in George Town, and The View Twin Towers condominium in Batu Uban.
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