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KUALA LUMPUR: HwangDBS Vickers Research (HDBSVR) has a Target Price of RM1.30 for Magna Prima, which is a niche property developer with RM1 billion worth of launches in Klang Valley over next two years.
The research house said on Wednesday, March 24 it sees strong earnings growth for Magna Prima, but cash flow management and cost control will be crucial.
“The RM1.30 TP is based on small-cap 40% discount to RNAV of RM2.17 (RM1.52 excluding Lai Meng high-end condominiums),” it said.
Hwang DBS Vickers Research said Magna Prima was recently re-classified under “Property” on Bursa Malaysia, in line with its repositioning as a niche developer that focuses on high-value, small pockets of land in the Klang Valley.
Following a change in top management in 2009, it went on an acquisition spree to boost its landbank.
Magna Prima plans to launch six projects worth RM1 billion by 2011, comprising gated landed residential and commercial developments in the Klang Valley.
Its high-end condo project near KLCC is expected to come on stream after 2013 (post-relocation of Lai Meng school pending approval from Education Ministry). A potential JV partner may be required given the massive size (GDV of RM1 billion) and target market.
“We expect Magna Prima’s net gearing to balloon to 171% from 10% currently, due to recent land acquisitions and working capital requirements.
“This could decline to 130% by 2012 with improved operating cashflows. With an internal construction arm, there should be better management of cost, quality and execution. Land replenishment may be a concern given the aggressive launch plans and tight cashflow,” it said.
Hwang DBS Vickers Research said the stock was currently trading at 55% discount to RNAV, in line with small-cap developers.
