TA Enterprise's Sydney launch a success

TA Enterprise Holdings Bhd (Dec 27, 58 sen)
Maintain buy at 59 sen with a target price of RM1.10: Net profit for 9MFY12 of RM72 million is 70% of our FY12 profit, led by higher hotel and broking income. Net profit for 3QFY12 fell 55% quarter-on-quarter (q-o-q) after a RM15 million foreign exchange translation loss on financing activities and higher effective tax rate (29%) due to underprovision in previous years. As expected, property contribution remained small at 3% of total earnings before interest and tax. Bursa Malaysia's trading volume in the August to October quarter rose 18% to RM1 billion and value was up 3% to RM1.6 billion. As a result, broking income grew 18%. No dividends were declared in the quarter.

TA Global (TAG) launched the first parcel of Little Bay Cove, Sydney, Australia, in December. Called "The Solis", the 45 apartments were offered at prices starting from A$495,000 (RM1.6 million) each. Registrations in Sydney and Malaysia have been encouraging so far. This is TAG's maiden venture in the Australian property market.

Our RM1.10 sum-of-parts-based target price is based on 45% discount to realisable net asset value for property and 0.8 times price-to-book value (P/BV) for broking. TAG's future property launches in Malaysia and overseas could be earnings and rerating catalysts. Its current project in Malaysia is Damansara Avenue with about RM1.3 billion in gross development value, while its projects in Canada are expected to rake in RM400 million and Australia RM900 million.

Future developments, including the 0.9ha parcel in a prime KLCC area and 1.2ha in Bukit Bintang, will further unlock its land values. Its broking business may be valued higher, as Singapore's UOB recently offered to buy Innosabah Securities at 1.4 times P/BV. — HwangDBS Vickers Research, Dec 27