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Expanding Penang Exposure
THE BUZZ
On 10 May 2010, Plenitude proposed to acquire 27 parcels of freehold land in Batu Ferringhi, in the north of Penang Island, totaling some 40.8 acres for RM45m (or RM25psf). The acquisition is expected to be completed by the end of the year. (Bursa).
OUR TAKE
Nice location. The parcels of land, zoned for residential use and are currently vacant, are located within short walking distance from Batu Ferringhi beach. Surrounding the parcels of land is the established housing development of Eden Feringghi Resort Homes comprising semi-Ds, bungalows and high-rise condominiums. It is also near the Upland International School and Batu Ferringhi’s commercial areas as well as the UNESCO Heritage City of Greentown.
The estimated GDV. Assuming the price paid is fair and represents about 10%-15% of the budgeted GDV, the projected value could be worth between RM300m-RM450m. Having said that, the management has yet to disclose the budgeted value for the upcoming project.
What the project is for. The development is slated for medium high-end, semi-detached houses and condominiums whose units are designed with generous living space such as patios and balconies to take advantage of the lush of greenery and sea view surrounding the project. The target markets are first and second home buyers, resort home buyers, the expatriate community and MM2H applicants who are eyeing a resort-style environment.
Project not included in forecast for now. Apart from the GDV, the estimated development costs launch dates and other launching details are currently sketchy. As such, we are not including the upcoming project into our forecast and valuation at this juncture. The proposed land acquisition, meanwhile, is expected to be completed by 2HCY10 (or 1HFY11). Plenitude’s prime focus has been the development of townships, which have so far been able to provide stable organic growth over the past few years. This upcoming project in Penang will not only expand Plenitude’s presence on the Island but will also provide the catalyst for good future earnings growth, in addition to stable earnings contribution from its traditional township developments.
Maintain Trading Buy. We continue to believe that a broad sector rebound starting from late 2010/early 2011 will soon stir up investment interest in fundamentally-sound and stillundervalued property stocks. As we also believe that most mid- to big-cap stocks have somewhat fully priced in the anticipated rebound, value can now be found only in the smallercap property stocks such as Plenitude which are trading at a significant discount even to the mid-cap stocks. As the 2011 rebound materialises, the risk premium on smaller caps is likely to fall and the valuation gap narrow. Using the valuation of small- mid-cap stocks as a benchmark, we value Plenitude at 0.71x CY10 P/NTA, which gives the stock a CY10 target price of RM3.84. The share price is well-supported by the company’s anticipated robust earnings growth, strong balance sheet with net cash of RM1.82/share, and the fact that it is current trading at a significant 41% discount to its NAV.
THE BUZZ
On 10 May 2010, Plenitude proposed to acquire 27 parcels of freehold land in Batu Ferringhi, in the north of Penang Island, totaling some 40.8 acres for RM45m (or RM25psf). The acquisition is expected to be completed by the end of the year. (Bursa).
OUR TAKE
Nice location. The parcels of land, zoned for residential use and are currently vacant, are located within short walking distance from Batu Ferringhi beach. Surrounding the parcels of land is the established housing development of Eden Feringghi Resort Homes comprising semi-Ds, bungalows and high-rise condominiums. It is also near the Upland International School and Batu Ferringhi’s commercial areas as well as the UNESCO Heritage City of Greentown.
The estimated GDV. Assuming the price paid is fair and represents about 10%-15% of the budgeted GDV, the projected value could be worth between RM300m-RM450m. Having said that, the management has yet to disclose the budgeted value for the upcoming project.
What the project is for. The development is slated for medium high-end, semi-detached houses and condominiums whose units are designed with generous living space such as patios and balconies to take advantage of the lush of greenery and sea view surrounding the project. The target markets are first and second home buyers, resort home buyers, the expatriate community and MM2H applicants who are eyeing a resort-style environment.
Project not included in forecast for now. Apart from the GDV, the estimated development costs launch dates and other launching details are currently sketchy. As such, we are not including the upcoming project into our forecast and valuation at this juncture. The proposed land acquisition, meanwhile, is expected to be completed by 2HCY10 (or 1HFY11). Plenitude’s prime focus has been the development of townships, which have so far been able to provide stable organic growth over the past few years. This upcoming project in Penang will not only expand Plenitude’s presence on the Island but will also provide the catalyst for good future earnings growth, in addition to stable earnings contribution from its traditional township developments.
Maintain Trading Buy. We continue to believe that a broad sector rebound starting from late 2010/early 2011 will soon stir up investment interest in fundamentally-sound and stillundervalued property stocks. As we also believe that most mid- to big-cap stocks have somewhat fully priced in the anticipated rebound, value can now be found only in the smallercap property stocks such as Plenitude which are trading at a significant discount even to the mid-cap stocks. As the 2011 rebound materialises, the risk premium on smaller caps is likely to fall and the valuation gap narrow. Using the valuation of small- mid-cap stocks as a benchmark, we value Plenitude at 0.71x CY10 P/NTA, which gives the stock a CY10 target price of RM3.84. The share price is well-supported by the company’s anticipated robust earnings growth, strong balance sheet with net cash of RM1.82/share, and the fact that it is current trading at a significant 41% discount to its NAV.
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