Friday, January 28, 2011

SPB ... Jan11

It is potentially poised to be one of the beneficiaries of the Greater Klang Valley mass rail transit (MRT) project.
Currently, the company has a 34-acre developable land bank and 1.2 million sq ft of office space in Pusat Bandar Damansara, where an MRT interchange could possibly be developed.
SelProp is in a good position to bid for the MRT interchange at Pusat Bandar Damansara to be located on its site.

Apart from having strategically located land bank in PBD, SelProp also has a strong balance sheet to leverage on. SelProp’s cash and cash equivalent amounted to RM595.7 million as of Oct 31, against debts of RM397.5 million. This means that it was sitting on a net cash position of almost RM200 million.

SelProp has not undertaken an equity-based fund raising exercise over the past decade.

Though its earnings trend tends to be volatile, the company has been constantly paying cash dividends since its listing in 1987.

For the year ended Oct 31, SelProp posted a net profit of RM42.62 million, up 29.3% from RM33 million in FY09 due to a revaluation surplus of RM29.7 million on its investment properties. Earnings per share was 12.4 sen. Revenue, however, fell 37% to RM203.04 million from RM321.7 million.

The group is majority owned by Kayin Holdings Sdn Bhd, which holds an equity interest of 66.3% interest in the property developer.

Its book value stood at RM5.12 per share.

Some of SelProp’s assets are ripe for revaluation.

Expecting SelProp to register the strongest RNAV growth over the next three to five years with a 60% upside in its RNAV to hit RM11.71 per share by then. This is based on the assumption that land values appreciate to RM 1,300 per sq ft from RM600 per sq ft currently.

Given its strategic land bank, attractive valuation and concentrated shareholding, SelProp could be a potential M&A (merger and acquisition) or joint venture target or privatisation candidate.

SelProp holds a 51% stake in education player Help International Corp Bhd, whose earnings have been expanding steadily, with a four-year compounded annual growth rate of 20%.

SelProp’s further upside could also be driven by redevelopment works. MRT and higher plot ratios under the Revised Draft KL Structure Plan should encourage high-end high density mixed developments in Pusat Bandar Damansara-Damansara Heights.

Pusat Bandar Damansara should be more vibrant with the redevelopment of Johor Corp’s government offices and Guocoland’s RM2 billion Damansara City mixed development, which is slated for launch middle of the year (2011).

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