MKH enters JV for property project in Kajang worth RM1b GDV

MKH Bhd (Aug 10, RM2.26)

Maintain buy with a target price of RM3.80: MKH Bhd has entered into a joint-venture (JV) agreement with Sim See Hua Group, which owns 130.05 acres (52.63ha) of land in Kajang, to undertake property development with an estimated gross development value (GDV) of RM1 billion.

This will boost its total GDV by 9% to RM12 billion, of which 60% is concentrated in the growing Kajang/Semenyih corridor.

The landowner’s entitlement to RM238.95 million will be progressively paid over eight years, implying a RM42 psf consideration for the 130-acre land, which constitutes 24% of total GDV.

We are positive on the JV as the land is located next to MKH’s existing 270-acre Kajang 2, which will be linked to a KTM commuter station.

Also, the staggered payment for the entitlement bodes well for MKH, allowing it to focus on the delivery of its record-high RM843 million unbilled sales. We believe more launches in Kajang 2 will be rolled out closer to the completion of the Mass Rapid Transit in 2017.

MKH is now trading at a bargain valuation of six times financial year 2016 price-earnings ratio, 0.8 times price-to-book value and a 60% discount to our sum-of-parts valuation. This is not justified, given the group’s sound earnings prospects.

We continue to like MKH for its undemanding valuation as well as clear earnings visibility anchored by its twin drivers — property and plantations. — AllianceDBS Research, Aug 10

This article first appeared in the digitaledge Daily on Aug 11, 2015. Subscribe here.