BENALEC (5190) - Benalec Holdings - Anchored by land sale gains
Target RM1.03 (Stock Rating: ADD)
Although Benalec's annualised 1H15 core net profit made up only 58% of our and consensus’ full-year forecasts, we consider the results as broadly in line as we expect outstanding land sale gains in Melaka to drive 2H15's earnings. The slow progress of land reclamation contracts was not unexpected. It was also mitigated somewhat by the RM29m in land sale profits YTD. We maintain our FY15-17 EPS forecasts but raise our target price (still pegged to a 30% RNAV discount) as we update for balance sheet items. We continue to like Benalec as it rides on the potential recovery of land reclamation works in South Johor. Maintain Add. Key catalysts are securing new ventures in Tanjung Piai.
1H15 broadly in line
Annualised 1H15 core net profit made up 58% of our and consensus full-year numbers. There were no major surprises in operational numbers, which were mainly driven by land sale gains in Melaka, with RM29m in pretax profit YTD. The losses in other segments i.e. land reclamation and vessel chartering were largely expected given the guided slow progress from earlier in the year. We expect subsequent quarters to reflect a surge in land sale profits from Melaka given the delayed land titles from 1Q15. Benalec should be realising over RM30m worth of land sale profits in 2H. The absence of dividends is also not a surprise.
EIA for Tanjung Piai remains a positive milestone
The group recently secured the environmental impact assessment (EIA) approval for the 1,000-acre land reclamation work in Tanjung Piai. This remains a big milestone as it could translate to a lucrative longer-term profit stream outside of Melaka. Working on a RM52 psf average reclamation cost (relatively higher than the benchmark reclamation cost for the group's project in Melaka) and a fair RM65 psf selling price (RM13 psf surplus value), Benalec could gain RM396m in net profit (or c.RM80m p.a. at 70% stake) over the next five years, assuming that reclamation works with a signed SPA begin in FY16.
Rerating from more clarity in strategy in Tanjung Piai
The stock has done well so far this year. Further rerating could mainly be event-driven, underpinned by its recovery story, and management's better engagement with investors regarding its new strategies in Tanjung Piai ie. securing the long-delayed 1,000-acre contract by mid-year, or other offtakers.
Source: CIMB Daybreak - 12 February 2015
Target RM1.03 (Stock Rating: ADD)
Although Benalec's annualised 1H15 core net profit made up only 58% of our and consensus’ full-year forecasts, we consider the results as broadly in line as we expect outstanding land sale gains in Melaka to drive 2H15's earnings. The slow progress of land reclamation contracts was not unexpected. It was also mitigated somewhat by the RM29m in land sale profits YTD. We maintain our FY15-17 EPS forecasts but raise our target price (still pegged to a 30% RNAV discount) as we update for balance sheet items. We continue to like Benalec as it rides on the potential recovery of land reclamation works in South Johor. Maintain Add. Key catalysts are securing new ventures in Tanjung Piai.
1H15 broadly in line
Annualised 1H15 core net profit made up 58% of our and consensus full-year numbers. There were no major surprises in operational numbers, which were mainly driven by land sale gains in Melaka, with RM29m in pretax profit YTD. The losses in other segments i.e. land reclamation and vessel chartering were largely expected given the guided slow progress from earlier in the year. We expect subsequent quarters to reflect a surge in land sale profits from Melaka given the delayed land titles from 1Q15. Benalec should be realising over RM30m worth of land sale profits in 2H. The absence of dividends is also not a surprise.
EIA for Tanjung Piai remains a positive milestone
The group recently secured the environmental impact assessment (EIA) approval for the 1,000-acre land reclamation work in Tanjung Piai. This remains a big milestone as it could translate to a lucrative longer-term profit stream outside of Melaka. Working on a RM52 psf average reclamation cost (relatively higher than the benchmark reclamation cost for the group's project in Melaka) and a fair RM65 psf selling price (RM13 psf surplus value), Benalec could gain RM396m in net profit (or c.RM80m p.a. at 70% stake) over the next five years, assuming that reclamation works with a signed SPA begin in FY16.
Rerating from more clarity in strategy in Tanjung Piai
The stock has done well so far this year. Further rerating could mainly be event-driven, underpinned by its recovery story, and management's better engagement with investors regarding its new strategies in Tanjung Piai ie. securing the long-delayed 1,000-acre contract by mid-year, or other offtakers.
Source: CIMB Daybreak - 12 February 2015
