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KUALA LUMPUR: Main Market-bound Ivory Properties Group Bhd's initial public offering (IPO) is attractively priced at just 3.4 times FY11 earnings, backed by potentially transformational growth from large NAV-accretive land deals, said AmResearch.
The research house said the IPO issue price was at a steep 63% discount to its net asset value (NAV) of RM2.70 per share, as well as to its small-cap peers.
"This is despite Ivory's strong earnings growth prospects, an aggressive presales pipeline of prolific development projects and scope for acquisitive growth," it said in a report on Thursday. Ivory, an established property developer in Penang, is scheduled to be listed on July 28.
AmResearch said its fair value of RM1.75 per share was pegged at a 35% discount to its estimated NAV, implying a forward price/earnings (PE) of seven times, and backed by strong three-year earnings at a compound annual growth rate (CAGR) of 63% over FY10F to FY12.
It forecasts earnings of RM36 million in FY10, rising by 51% to RM54 million in FY11 and a further 30% to RM70 million in FY12, putting its three-year earnings CAGR at a solid 63% off an earnings base of RM17 million in FY09.
AmResearch said the balance sheet was strong, with net gearing improving from 19% to 10% in FY11, leaving ample room to fund acquisitions.
Its earnings model assumes a conservative dividend payout policy of 15%, translating to prospective dividend of 2.9 sen per share in FY10, rising to 4.4 sen and 5.7 sen in FY11 and FY12, respectively. Upon listing, Ivory would have a paid-up capital of RM186 million comprising 186 million shares of RM1 each.
AmResearch said its investment thesis on Ivory also centred on the scope for significant "event-driven" re-rating.
"This may be driven by the transformational growth from potentially large NAV-accretive land deals in Penang. The land acquisitions may be imminent, we believe.
"We understand from management that Ivory is actively negotiating with several parties to acquire several large prime development sites located in the prestigious Jesselton residential neighbourhood, Tanjung Bungah as well as the Gurney Drive tourist belt," it said.
AmResearch said its channel checks with industry sources revealed that the state government was also looking to reclaim some 300 acres (120ha) of prime seafront land stretching from E&O's Seri Tanjung Pinang township to Gurney Drive.
"This project is to be undertaken on a joint-venture basis with a private developer. Despite its relatively smaller size, we believe Ivory has the competitive edge to bid for this project given the group's ‘home ground' advantages and strong execution capability particularly in spearheading urban renewal in the island-state," it said.
"Ivory has strong localised knowledge and an impeccable execution track record, with quick turnaround time. It is at the forefront of urban renewal in Penang.
"The redevelopment of the Escoy tin smelter into the prolific Penang Times Square is a good case in point, giving Ivory bargaining leverage to negotiate future redevelopments," it said.
AmResearch said Ivory was a pure proxy to the robust residential market in Penang because of its strategically located prime development sites and astute deal-making, particularly in successfully reviving "abandoned" projects.
It said Ivory would be accelerating presales from RM500 million in FY10 to RM750 million in FY11 while unbilled sales had already risen to RM385 million, lifted by some RM200 million in sales over the last three months.
AmResearch said the group was set to accelerate its pipeline of new launches with several exciting new presales, including the resort villas and bungalows at Island Resort, The Latitute@The Peak and The Residences.
"We forecast its unbilled sales to exceed RM500 million by end-2010, or more than four times FY09's revenue," it said.
The research house said the IPO issue price was at a steep 63% discount to its net asset value (NAV) of RM2.70 per share, as well as to its small-cap peers.
"This is despite Ivory's strong earnings growth prospects, an aggressive presales pipeline of prolific development projects and scope for acquisitive growth," it said in a report on Thursday. Ivory, an established property developer in Penang, is scheduled to be listed on July 28.
AmResearch said its fair value of RM1.75 per share was pegged at a 35% discount to its estimated NAV, implying a forward price/earnings (PE) of seven times, and backed by strong three-year earnings at a compound annual growth rate (CAGR) of 63% over FY10F to FY12.
It forecasts earnings of RM36 million in FY10, rising by 51% to RM54 million in FY11 and a further 30% to RM70 million in FY12, putting its three-year earnings CAGR at a solid 63% off an earnings base of RM17 million in FY09.
AmResearch said the balance sheet was strong, with net gearing improving from 19% to 10% in FY11, leaving ample room to fund acquisitions.
Its earnings model assumes a conservative dividend payout policy of 15%, translating to prospective dividend of 2.9 sen per share in FY10, rising to 4.4 sen and 5.7 sen in FY11 and FY12, respectively. Upon listing, Ivory would have a paid-up capital of RM186 million comprising 186 million shares of RM1 each.
AmResearch said its investment thesis on Ivory also centred on the scope for significant "event-driven" re-rating.
"This may be driven by the transformational growth from potentially large NAV-accretive land deals in Penang. The land acquisitions may be imminent, we believe.
"We understand from management that Ivory is actively negotiating with several parties to acquire several large prime development sites located in the prestigious Jesselton residential neighbourhood, Tanjung Bungah as well as the Gurney Drive tourist belt," it said.
AmResearch said its channel checks with industry sources revealed that the state government was also looking to reclaim some 300 acres (120ha) of prime seafront land stretching from E&O's Seri Tanjung Pinang township to Gurney Drive.
"This project is to be undertaken on a joint-venture basis with a private developer. Despite its relatively smaller size, we believe Ivory has the competitive edge to bid for this project given the group's ‘home ground' advantages and strong execution capability particularly in spearheading urban renewal in the island-state," it said.
"Ivory has strong localised knowledge and an impeccable execution track record, with quick turnaround time. It is at the forefront of urban renewal in Penang.
"The redevelopment of the Escoy tin smelter into the prolific Penang Times Square is a good case in point, giving Ivory bargaining leverage to negotiate future redevelopments," it said.
AmResearch said Ivory was a pure proxy to the robust residential market in Penang because of its strategically located prime development sites and astute deal-making, particularly in successfully reviving "abandoned" projects.
It said Ivory would be accelerating presales from RM500 million in FY10 to RM750 million in FY11 while unbilled sales had already risen to RM385 million, lifted by some RM200 million in sales over the last three months.
AmResearch said the group was set to accelerate its pipeline of new launches with several exciting new presales, including the resort villas and bungalows at Island Resort, The Latitute@The Peak and The Residences.
"We forecast its unbilled sales to exceed RM500 million by end-2010, or more than four times FY09's revenue," it said.
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