Written by Joseph Chin
Tuesday, 05 January 2010 10:56
KUALA LUMPUR: Shares of Land & General rose in active trade on Tuesday, Jan 5 after CIMB Equities Research said there was more upside for the company and its share price.
At 10.49am, L&G was up seven sen to 46.5 sen with 37.75 million shares done.
The FBM KLCI rose 12.99 points to 1,288.74. Turnover was 799.86 million shares valued at RM682.28 million.
CIMB Research said L&G had net cash of RM128 million or 21 sen per share, which was rare for a property company as those under its coverage had gearing of 17% to 79%.
“Although L&G’s net cash position is likely to decline as it starts buying land and steps up its launches, it is nonetheless in a very healthy position. If it wanted to, it could theoretically pay out 21 sen or 53% of its share price as dividends, or even take on some borrowings to pay dividends equivalent to its entire share price,” it said.
CIMB Research said it liked the “quick turnaround” model popularised and successfully implemented by Mah Sing. It involves acquiring small parcels of land that already have most approvals in place and can be launched six to 12 months after acquisition.
“Upside is considerable. As L&G’s earnings remain uncertain and its main contributors are the newly launched 8trium project, RM2 million to RM3 million annual pretax profit from the PLANTATION []s business and another RM4 million to RM5 million earnings per annum from education, it would be more appropriate to value it on a discount to RNAV rather than P/E as per Mah Sing due to the latter’s steady and sustainable earnings growth.
Based on a 40% to 50% discount to RNAV, which is on par with the smaller-cap and less liquid property stocks such as Hunza Prop and UM Land, L&G would still be valued at 62 sen to 74 sen. This suggests significant upside of 57-87% to its share price.
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