FY10 earnings to fall. We are projecting FY10 earnings to fall by some 20%-30% y-o-y as its current high unbilled sales will be largely exhausted by 4Q09/1Q10 once the Troika and One Menerung are completed, coupled with the slower new property sales and lack of new property launches recently.
A handful of prime projects to launch, but… Although BRDB has a handful of prime upcoming projects, its reluctance to launch any of them in recent months was mainly due to its pessimism on the mid-term outlook for the property market. Such projects would include:
(i) 2 office towers and a RM250m condo in CapSquare;
(ii) an estimated RM440m and >RM700m worth of condos in Hartamas II and Bukit Bandaraya respectively;
(iii) >RM700m low-rise condos in Taman Duta;
(iv) RM2bn integrated mixed development next to the Batu 3 toll along the Federal Highway in Subang Jaya, and finally
(v) the impending Oman JV to develop a RM6bn seafront project.
A handful of prime projects to launch, but… Although BRDB has a handful of prime upcoming projects, its reluctance to launch any of them in recent months was mainly due to its pessimism on the mid-term outlook for the property market. Such projects would include:
(i) 2 office towers and a RM250m condo in CapSquare;
(ii) an estimated RM440m and >RM700m worth of condos in Hartamas II and Bukit Bandaraya respectively;
(iii) >RM700m low-rise condos in Taman Duta;
(iv) RM2bn integrated mixed development next to the Batu 3 toll along the Federal Highway in Subang Jaya, and finally
(v) the impending Oman JV to develop a RM6bn seafront project.
As some of these projects will be sited on the last few remaining prime landbank in their respective vicinities, BRDB has refused to follow the recent trend whereby other developers offered various discounts and innovative financing schemes for their projects to meet their respective sales targets at the expense of earnings margin. BRDB feels that the timing of launches in accordance to the property cycle is more important to maximise shareholder value in the long run.
Downgrade to NEUTRAL. We maintain our CY10 target price of RM1.83 based on 0.52x CY10 P/NTA. Since we upgraded BRDB to a ‘buy’ in our 26 Oct 2009 sector report, its share price has appreciated by as much as 18%. Given the limited further upside from the current level, we are downgrading BRDB to a NEUTRAL for now.
Downgrade to NEUTRAL. We maintain our CY10 target price of RM1.83 based on 0.52x CY10 P/NTA. Since we upgraded BRDB to a ‘buy’ in our 26 Oct 2009 sector report, its share price has appreciated by as much as 18%. Given the limited further upside from the current level, we are downgrading BRDB to a NEUTRAL for now.