Selangor Dredging (Kenanga Research) hold; target price RM1.07

Selangor Dredging
1Q11 net profit within expectations

• 1Q10 net profit of RM5.7m was inline with our forecast at 24% of FY11 net profit of RM23.7m. Revenue was 28% higher as the current combination of progressive billings are from more expensive products like 20Trees, Five Stones, Jia (Singapore) and from next quarter onwards Gilstead Two (Singapore) and 20Trees West. This was reflected in the better EBITDA margin of 23.6%.

• QoQ 1Q11 net profit was 45% lower as 4Q10 included the final progress billings for Ameera which received Certificate of Fitness (for occupation in December 2009). Hence throughout January to March 2010 (4Q10), SDB was busy handing over the units.

• YoY, 1Q11 net profit 112% higher given the higher priced properties which are being progressively billed now compared to a year ago. l We are maintaining our forecast. Five Stone second phase of 192 units with GDV of RM210m was launched in January 2010 and is almost fully sold and as such we are maintaining FY11 forecast. Gilstead Two was launched in June 2010. With a total of 110 units (two bed room apartments with sizes of 904sf and 775 sf), it is more than 50% sold being priced at S$1,900 psf and S$2,300 psf. 20Trees West was also launched in July 2010 with 48 units of bungalows ranging form 6,400sf to 7,100sf priced between RM4.7m – RM6.7m.

• Maintain HOLD with existing target price of RM 1.07 based on RNAV. Rerating catalyst for the stock is the resolution of the problems in relation to 21 Damansara which will generate at least RM200m GDV.

• SDB has a strong pipeline of projects which augurs well for the company giving it continuous earnings stream and so far the take-up rates a re encouraging even at benchmark prices signalling that SDB know the market well and to its buyers, it is offer value for money for its properties.