Business & Markets 2012
Written by Janice Melissa Thean of theedgemalaysia.com
Thursday, 06 December 2012 17:01
KUALA LUMPUR (Dec 6): UOB Kay Hian Research initiates a "buy" call on Dijaya Corp Bhd at a target price of RM1.41 based on cheap valuation and much upward re-rating catalysts.
The property developer now has 847 acres of land with a gross development value (GDV) of RM38 billion following aggressive land acquisitions in Klang Valley, Penang Island and Danga Bay, Iskandar Malaysia.
"Dijaya has all the right ingredients to re-rate upwards at its "asset monetisation phase", especially on the back of stronger property sales and other forms of asset monetisation, including listing selected assets as REITs, healthy unbilled sales of close to RM733 million, recurring income of RM45.8 million in 2013 (47% of 2011's EBIT), and its potential to play the role of an industry consolidator," said UOB in a note today.
Its asset monetisation efforts will include targeted property launches of RM1.6 billion, RM2.3 billion and RM2.5 billion in 2012, 2013 and 2014 respectively. Dijaya also disposed a small land parcel for RM106 million recently.
"We also expect Dijaya to significantly monetise some existing landbanks in Kuala Lumpur and Penang, and to engage in a capital preservation scheme for the CONSTRUCTION [] of W Hotel. All these efforts will greatly reduce Dijaya's gearing level and enhance working capital and cash flow," said UOB.
In the medium term, the research house believes that Dijaya is in a good position to REIT its investment PROPERTIES [] which could have a collective worth of RM1.6 billion, including RM513 million from its future Tropicana Gardens mall.
UOB's RM1.41 target price on Dijaya implies a 12.2 times 2014 forecast PE ratio and is a 40% discount to RNAV of RM2.34. "We expect the current 40% discount to RNAV to narrow when Dijaya begins to deliver good sales and successfully monetise its non-core assets," it said.