Will this 4 immitate the share price of KLCCP???
I like Dijaya, KSL and WCT.
Dijaya, MRCB, KSL and WCT potential REIT owners: UOB-KayHian
Business & Markets 2012
Written by Cindy Yeap of thedgemalaysia.com
Tuesday, 20 November 2012 16:18
KUALA LUMPUR (Nov 20): Investors should pay more attention to property developers who own sizeable retail-centric investment PROPERTIES [] like Dijaya Corp Bhd, MALAYSIAN RESOURCES CORP [] Bhd (MRCB), KSL HOLDINGS BHD [] and WCT BHD [] as these companies are potential REIT-owners, says UOB KayHian Research.
All four companies own retail malls in Malaysia.
REITs, short for real estate investment trusts, are sought after amid uncertainties for their ability to pay-out consistent dividends. In particular, prices of Malaysian retail-centric REITs have appreciated 30% the past year, causing net yield to compress from an average of 6.5% to as low as 4.5%.
“As we expect the yield compression theme to persist, investors should continue to spot upcoming REIT plays in the medium term,” UOB KayHian said in a note today (Nov 20).
“With a current net yield benchmark of 5% for large-cap retail-centric REITs, we see great value in property developers who own sizeable retail-centric investment properties,” it said.
Given that managers of Malaysian REITs (M-REITs) have been actively searching for growth, UOB KayHian said investors can potentially enjoy greater upside if they can latch on early to “less obvious asset owners” or property developers that can either become a REIT owner or unlock value of their portfolio by selling some assets to REIT managers.
“These undervalued gems include properties from Dijaya, MRCB and KSL Holdings. The potential values that can be unlocked are significant relative to their respective market capitalisations,” the research house said in the note.
“And it is interesting to note that these REIT-able assets can fetch values that imply forward price-to-earnings (PE) multiples of 18 times to 33 times, relative to these companies’ prospective PEs of under 10 times,” UOB KayHian added. The multiples of 18 times to 33 times are the inverse of the prospective net yields of retail M-REITS.
“Share prices of holding companies tend to appreciate when REITs are announced or anticipated,” UOB KayHian added, pointing to the stock price performance of KRISASSETS HOLDINGS BHD [] prior to IGB REIT’s listing. KrisAssets is the IGB subsidiary which owns the shopping malls injected into IGB REIT.
According to today’s note, Dijaya’s asset portfolio includes Tropicana City Mall and the upcoming Tropicana Gardens mall in Kota Damansara, Petaling Jaya that is to have direct MRT accessibility.
Dijaya will have investment properties worth up to RM1.8 billion by 2016. “Capitalising investment properties on the REIT investment theme is a huge catalyst for the company,” said UOB KayHian which does not have a recommendation on Dijaya.
Meanwhile, WCT’s investment properties include Paradigm Mall in Petaling Jaya, BBT Shopping Mall and a 70% stake in the KLIA2 Integrated Complex. “Assuming a cap rate of 5.5%, these properties could fetch RM1 billion, which represent 0.5 times its current market capitalisation,” the research house said.
Cap rate, or capitalisation rate, indicates the income a property asset is expected to generate versus how much it cost.
Over at MRCB, UOB KayHian notes that the company’s NU Sentral Mall, KL Sentral Park and 348 Sentral, which will come on-stream by the first half of 2013. “Assuming an occupancy rate of 90% by 2013, these investment properties could fetch a whopping RM2.3 billion or 0.8 times its current market capitalisation, based on a cap rate of 5.5%,” UOB KayHian said.
It has a “buy” recommendation and RM2.03 price target for MRCB. At 3.19pm today, MRCB was unchanged at RM1.76 apiece. Over 1.8 million shares changed hands between RM1.74 and RM1.78 each.
Johor-based KSL Holdings, on the other hand, has two Giant shopping malls and KSL City, which collectively spanned 712,000 sq ft in net lettable area (NLA). “Assuming a cap rate of 5.5% by 2013, KSL City could be worth RM473 million, which represents 85% of its market capitalisation. UOB KayHian does not have a recommendation on KSL.
The research house is taking a cautious stance on KLCC PROPERTY HOLDINGS BHD [], though, as the stock price had ran in recent months on news of the potential asset spin-off into a REIT – raising the question of just how much upside is left.
“We hold a cautious stance on the share price performance of KLCC Prop post-listing of KLCC REIT. Recall that after IGB REIT was listed, IGB Corp’s share price declined about 14%. Bear in mind that IGB Corp’s share price had merely appreciated 25% pre-listing of its REIT versus KLCC Properties’ 70% rally since the middle of the year,” it said in the note.
UOB KayHian calculates that KLCC Prop could be worth RM6.46 per share, assuming a 15% discount to revised net asset value (RNAV), which is benchmarked against KrisAssets’s share price performance prior to IGB REIT’s listing.
The research house has a “hold” recommendation and RM6.46 price target for KLCC Prop. At 3.19pm today (Nov 20), KLCC Prop was up 1 sen or 0.18% to RM5.55 apiece on a volume of 929,200 shares.
It also has a “hold” recommendation on WCT with RM2.74 price target. At 3.19pm today (Nov 20), WCT gained 1 sen or 0.37% to RM2.72 on a volume of 709,800 shares.