This article first appeared in The Edge Financial Daily on March 13, 2020

Crest Builder Holdings Bhd 
(March 12, 75 sen)
Initiate buy with a fair value of RM1.83: We expect Crest Builder Holdings Bhd (CBHB) to register core net earnings of RM20 million, RM21.8 million and RM28.1 million for financial years 2020 (FY20), FY21 and FY22. 

CBHB’s income is mainly derived from four segments — construction, property development, property investment and management, and concession arrangement.

The construction business comprises mainly infrastructure and building works of residential developments, healthcare amenities, infrastructure, leisure amenities, educational facilities and commercial developments. CBHB bagged several contracts worth more than RM500 million in the past 12 months. Presently, the remaining order book stands at RM1.24 billion indicating stable income for the next two to three years.

For the property development division, CBHB is planning a mixed commercial development, namely Latitud8, a joint-venture project with Prasarana Malaysia Bhd. Building on top of the Dang Wangi LRT station, the project has a gross development value (GDV) of about RM1.1 billion and is scheduled for launching in the second half of 2020. CBHB is also planning another mixed development in Kelana Jaya, comprising retail units, serviced residential suites and offices. The project has a GDV of about RM1 billion and is targeted to be launched in 2021.

CBHB acquired a piece of land measuring 2.646ha in Bukit Tinggi, Klang in December 2019 for RM55 million. It plans to build residential apartments worth an estimated RM450 million in GDV with its launch scheduled for the first quarter of FY21. 

The company has two investment properties — The Crest and Tierra Crest. The Crest is located in Seksyen 19, Petaling Jaya while Tierra Crest is in Kelana Jaya. Both properties are receiving RM8 million and RM9 million of yearly rental respectively. CBHB also manages a concession (51% stake) of the 5,000-student capacity Universiti Teknologi Mara (UiTM) Tapah 2 campus with the ministry of education and UiTM.

We believe the CBHB’s medium-term outlook is positive, anchored by several construction wins in the past few months while the upcoming launches will be one of its major earnings contributors beyond FY21. CBHB also has a stable income from a concession arrangement. 

Moreover, we believe the value of its investment properties deserves more attention. The stock is currently trading at an undemanding forward price-earnings ratio of 4.6-6.4 times for FY20-FY22. This offers a potential upside of more than 100% and a dividend yield of 4.5% — AmInvestment Bank, March 12