YTL Land re-discovered as a property favourite

KUALA LUMPUR: YTL Land & Development Bhd's share price has been climbing recently, gaining about 35% year-to-date as investors expect the company to be one of the beneficiaries of the upcoming MRT project under the government's greater KL plan.

Meanwhile, the proposed injection of new development land bank, which includes prime parcels in Kuala Lumpur's Golden Triangle and Singapore, into YTL Land by parent YTL Corp Bhd also boosted interests in the former.

It is worth noting that since the announcement of the proposed asset injection on Nov 23, 2010, YTL Land had seen its share price rise 76 sen or 60.3% to reach RM2.02 on Tuesday, Feb 8. It was up 10 sen on Tuesday alone, with 4.34 million shares done.

In a recent report, HwangDBS Vickers Research said YTL Land's land parcels in Sentul, KLCC-Bukit Bintang and KL Sentral are strategically located near the upcoming MRT stations, adding that the potential development value of the land is poised to increase significantly. It also stated that the injection of prime land into the KL city centre and Singapore by parent YTL Corp would make YTL Land a regional player.

The research firm had initiated a "buy" on YTL Land with a target price of RM2.80 per share.

The injection of new land bank into YTL Land, proposed late last year, is seen as a property asset rationalisation exercise within the YTL Corp group. YTL Corp owns 60.77% of YTL Land.

YTL Land's present crown jewel is the former KTM depot land in Sentul, which has an outstanding development area of 46.76 ha. The injection of new land bank would further expand its asset base, with the addition of 400 ha of land in Bidor, over 120 ha in Genting Highlands, and pockets of prime land in the KL city centre such as Bukit Bintang, Jalan Stonor, Jalan U Thant, Brickfields, as well as Orchard Boulevard and Sentosa Cove in Singapore.

YTL Corp has proposed to inject these assets into YTL Land for a consideration of RM476.1 million, which include the settlement of RM262.4 million outstanding inter-company balances owed by these assets to YTL Corp.

YTL Land plans to facilitate the acquisition with RM223 million in cash and the remaining RM253.1 million via an issuance of ten-year irredeemable convertible unsecured loan stocks (ICULS).

In addition to the RM476.1 million, YTL Land has to settle another RM1.04 billion with its parent, being inter-company balances owed to YTL Corp by the Orchard Boulevard land in Singapore. However, the sum will only be settled later via "other funding arrangements".

All in, the total purchase consideration for all the assets would come up to RM1.52 billion, which is still at a 16.5% discount to the total market value of the RM1.82 billion for the land bank that would be injected.

Of the assets to be injected into the company, YTL Land has announced plans to develop the land in Orchard Boulevard, Sentosa Cove, and Jalan U Thant with a total estimated gross development profi t of RM290.7 million. It also has plans to develop the "to-be-injected" land in Bukit Bintang and Jalan Stonor for commercial use.

In a nutshell, HwangDBS said it viewed the exercise positively, as it would diversify YTL Land's earnings base to include prime land bank in KL and Singapore at reasonable valuations and beef up YTL Land's balance sheet to take on bigger projects in the future. YTL Corp's stake in YTL Land may increase to as high as 69% (upon conversion of ICULS) from about 60% currently.

For FY10 ended June 30, YTL Land posted a net profi t of RM18.6 million on the back of RM246.7 million in revenue. Its net profit for 1QFY11 ended Sept 30 was RM3.2 million.