HwangDBS sees “dividend windfall” for Keck Seng shareholders
Business & Markets 2012
Written by Chittesh Shukla of theedgemalaysia.com
Wednesday, 26 December 2012 18:22
HwangDBS sees “dividend windfall” for Keck Seng shareholders
Written by Chittesh Shukla of theedgemalaysia.com
Wednesday, 26 December 2012
KUALA LUMPUR (Dec 26): HwangDBS Vikers Research (HDBSVR), which is recommending a “buy” call on KECK SENG (M) BHD [] with a target price of RM6.00, said it expects a “dividend windfall” for shareholders.
“We believe that Keck Seng is primed for a major re-rating with potential dividend windfall for shareholders. We recommend that this is an opportune time to accumulate to ride on the catalyst as the market has yet to appreciate its full potential,” HDBSVR said in a research report.
According to the research house, Keck Seng could declare a bumper dividend of RM359 million or 96 sen per share by virtue of its section 108 balance, which has just expired.
If the company does not make full use of the credit balance, any unutilized credit balance will be forfeited.
HDBSVR also cited Keck Seng’s significantly undervalued land bank in Johor as a potential catalyst to increase the company’s target price by 12% for every RM5 per square feet (psf) land price increase. .
“Its 1,850 acres of prime Johor land bank surrounding Johor Bahru has not been revalued for the past 32 years. Current share price implies a grossly undervalued RM2.70 psf (versus over RM20 psf in Johor Bahru currently) valuation for the land bank which is totally unjustified,” the research house stated.
Given the robust development in Iskandar Malaysia together with the project completions of Legoland and Coastal Highway, Keck Seng’s land price appreciation is set to further propel.
“We arrive at our fair value of RM6.00 based on 30% discount to our conservative SOP valuation of RM8.50,” HDBSVR said.
Keck Seng’s third quarter ending 30th September saw revenue of RM242.4 million, a decline from RM335.5 million registered in the same quarter last year. Third quarter net profits also declined from RM 25.2 million last year to RM19.3 million this year.
For the nine months ending 30th September (9M12), earnings rose 7% year-on-year to RM60 million despite weaker crude palm oil prices.