Asia Analytica’s Stock Pick: Crescendo Corp

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Crescendo Corp Bhd

CRESCENDO offers investors an attractive exposure to industrial properties in Iskandar Malaysia, where demand is high, unlike the oversupplied condominium segment.

Crescendo has carved a niche in industrial properties, as well as township development. It is also involved in construction, concrete manufacturing and education. For FY January 2014, property and construction accounted for 68.7% of sales and 63.8% of pre-tax profit.

It owns a large landbank totalling 2,921 acres (1,182.09ha) in Johor, of which 54.8% is  located within Iskandar Malaysia. Ongoing projects include industrial properties at Nusa Cemerlang Industrial Park (NCIP) and Taman Perindustrian Cemerlang, and mixed development projects at Desa Cemerlang, Bandar Cemerlang and Tanjung Senibong.

Most of its projects are located within 16km to 30km of Johor Bahru, Senai Airport and Pasir Gudang, and are well connected by highways. NCIP is located 10 minutes’ drive from Tuas Singapore via the Second Link. The company also retains some of its industrial properties for rental income. 

The stock is trading at a low trailing 12-month P/E ratio of 4.37 times and a price-to-book ratio of 0.82 times. Dividend was 16 sen in FY2014, translating into a decent yield of 5.77%. 

Crescendo’s assets are undervalued as most were acquired or last revalued between 1996 and 2006. Land prices in Iskandar Malaysia have risen 2-3 fold in the last few years alone. In FY2014, development land, property, plant and equipment totalled RM543.7 million in its books. Divided by its land bank, the implied average land cost is just RM4.27 psf. 

Crescendo has unbilled sales of RM128 million as at end-July 2014 and intends to launch projects worth RM800 million over the next two years. For FY2014, sales increased 9.8% to RM310.3 million while pre-tax profit surged 98.8% to RM159 million. Net gearing is low at 9.2% in 2Q2015.

This article first appeared in The Edge Financial Daily, on October 13, 2014.