IJM LAND BHD
By RHB Research
Buy (maintained)
Target price: RM3.55
WE maintain our ‘buy’ call on IJM Land, but with a higher RM3.55 fair value. IJM Land has raised its stake in the Pantai Sentral Park project to 70%, from 40%, with a proportionately higher capital outlay.
Meanwhile, the company has also increased its exposure to Seberang Prai by buying 70 acres of land in Jawi at RM18.50 per sq ft, as big developers show growing confidence in the area.
Following the signing of a joint venture deal with Amona Development in Sept 2012, IJM Land has raised its stake in the 58-acre Pantai Sentral Park project to 70% from 40%.
As the terms of the agreement are the same, IJM Land only needs to fork out a proportionately higher capital outlay. Under the deal, the company has to pay Kuala Lumpur City Hall (DBKL) a total of RM331mil within six months upon fulfilling the stipulated conditions.
The amount include land cost, a minimum guaranteed profit and the cost of building an access road to the New Pantai Expressway, which has been pre-approved.
DBKL will be entitled to a 20% share of the excess profit. The project, estimated to have a gross development value (GDV) of RM4bil to RM5bil, is slated for launch in the fourth quarter of 2013.
This highly anticipated project comprises high- and low-rise condo units, surrounded by 200 acres of green lung.
Recognising the huge growth potential in Seberang Prai, IJM Land recently entered into a deal to acquire 70 acres of land in Jawi for RM56mil.
The site, located next to the Jawi toll, is just 20 to 25 minutes to the Penang Second Bridge. IJM Land plans to develop the land into a small township.
As the concept and development plans are still preliminary, we estimate that the land will add RM300mil to RM350mil in GDV to the company’s portfolio.
From our checks with developers, we found that new launches on the mainland have been well-received as job opportunities are teeming as more industrial players set up their plants in Batu Kawan and South Seberang Prai. As house prices on the mainland are more affordable, more young people are gradually moving from the island as properties on the island get more expensive.
All in, we revise our fair value to RM3.55 from RM3.42 to put it on par with the stock’s realiseable net asset value. IJM Land remains our top sector pick, apart from Sunway Bhd and Tambun Indah Land.