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IJM Land Bhd
(Oct 20, RM3.15)
Maintain “buy” with target price (TP) of RM3.55:
We maintain “buy” on IJM Land, pegged to the offer price of RM3.55 per share under parent IJM Corp Bhd’s privatisation proposal.

We visited IJM’s Bandar Rimbayu office recently to get an update of the project’s latest launch, Scarlet, and were impressed.

Scarlet comprises 110 units of linked homes under phase 4 of Bandar Rimbayu (gross development value: RM400 million). It is one of IJM Land’s major launches after the announcement of Budget 2015. Out of the 110 units, 45 non-bumiputera units were offered via balloting on Oct 12. The response was impressive — 28 units or 62% were pre-booked.

The good start for Scarlet affirms Bandar Rimbayu’s rapid emergence as a key township within the South Klang Valley.

Apart from Scarlet, all 24 units of the bumiputera lots released under phase 2 (Perennia) earlier this month were snapped up. The average prices for these units currently are approximately RM740,000 for 22’x80’ and about RM811,000 for 24’x80’ — these are RM70,000 higher than their initial launch prices.

We expect the balance 60% of phase 3 (Periwinkle: 32’x70’ cluster homes) to be well received, with a roughly 5% premium to its initial starting price of about RM875k.

The rising capital values and strong take-up rates fortify our growing conviction of IJM Land’s embedded value moving forward. Other prolific launches in the pipeline include phase 2 of The Lights (commercial) and Sebana Cove in Johor.

As an alternative, investors seeking leverage to IJM Land can buy directly into IJM Corp.

The elimination of IJM Land’s minority interest may lead to an upward repricing of price-to-earning ratio under an enlarged IJM Corp (market capitalisation of RM11 billion) with improved trading liquidity.

By extension, this may provide a 4% upside to IJM Corp’s fair value (RM8.30 per share).

More is to come, as we have yet to factor in potential contributions from: i) the Kuantan Port expansion and the newly-acquired industrial land nearby; ii) the balance of works under West Coast Expressway and Kajang Dispersal Link Expressway or Silk highway. — AmResearch, Oct 20

IJM-Land_theedgemarkets


This article first appeared in The Edge Financial Daily, on October 21, 2014.

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