The current equity market had been riding on tough wave with diminishing volume after a long bull run since the start of the year 2017. Industry involving with export, semiconductor and construction had been enjoying a good season as valuation continue to soar.
Selection of stock continue to be a challenge. As for me, I always like to poach on stock that are still sleeping, or had consolidated for a long time and had a good number of reason to see the stock to rise in the future. For this reason, I like to keep an look out on stock that have corporate exercise such as diversification, M&A or potential coming bonus issue.
Malaysia being a leading emerging market country in the South East Asia region had saw property and construction sector enjoying a good boom for the past 4 years. As a result of this, a lot of company are diversifying into the property development sector. One of the reason for this action is to unlock the underlying asset value (land value) through development purposes.
In fact, as of lately, Boon Koon had also made movement to diversify into property development. Another example is Kobay Technology from Penang which had also diversify into property development.
Now, I am interested to present to you this smallish company which is going on the same path like some other had done, diversifying into property development and unlocking the value of the land asset that they are holding from the past. This company is Sanbumi Holdings Berhad (Sanbumi - 9113).
To recap back, Sanbumi had made public on it's intention to diversify into the property sector back on July 2015. It's foray into the property development will be seeing a mixed development project at the prime area of Jalan Alma, Bukit Mertajam.
Location wise, it is not too bad as it is situated in between of the 2 bridges linking to Georgetown.
The project will be developed by Sanbumi Sawmill Sdn. Bhd. (subsidiary of Sambumi Holdings Berhad). The location is strategically located on a 1.62 acres land along Jalan Rozhan, about 1km away from AEON Mall and Tesco Stores.
According to known sources, the project is slated for a 42-storey commercial tower, offering a mix of shop offices and serviced residence. There will be two residential towers with 260 units in each tower:
- Level 1: Retail shops (18 units)
- Level 2: Shop offices (16 units)
- Level 3-8: Multi-level car parking
- Level 9: Facilities floor
- Level 10-42: Serviced residence
This will be Sanbumi first maiden project in its foray into the property development. The GDV is estimated to be at RM 350 million at the current market price.
You may wonder why this company caught my interest.
Here is how I will see it in my own angle. According to the latest financial report, Sanbumi do not have much debt, and they have a strong cash holding after the fund raising exercise from private placement. This development will be able to see great profit due to the absence of the cost of acquiring land at the current market value. Assuming a development cost of RM 250 million for a span of 5 years, that will be able to see a gross profit of RM 20 million a year for the next 5 years into Sanbumi income statement. Of course, all these are assumption from my own view, and you should go and do your own study in it.
According to related sources, Sanbumi had already obtain the approval for the construction. Prior to that, their project also had good response from expression of interest from interested purchaser.
The technical reading of Sanbumi had also express substantial interest in the development of the company in diversifying into property development. As you can see from the chart, Sanbumi had been consolidating in a good manner at the range of RM 0.26.
I believe that on upon the official launching of it's first maiden property development project, Sanbumi share price will see good interest pouring in. If you see that happening, locking in a position now will be better than chasing for a position later.
As the saying goes, chance sometimes, only come once. Will this be a good chance? You decide on it.