MK Land Holdings Bhd
(Feb 4, 44.5 sen)
Maintain outperform with a target price of 80 sen: MK Land signed a joint-venture (JV) agreement with Mammoth Empire Land Sdn Bhd, a wholly-owned subsidiary of Mammoth Empire Holdings Sdn Bhd, the developer of Empire Damansara (pic) and Empire City to develop a leasehold land measuring 11.8 acres (4.77ha). The land, we believe, is located within the group’s flagship development, Damansara Perdana.

No change to our earnings estimates pending more clarifications from the management. The land, which is made up of a few parcels of land, is said to be located in Mukim Sungai Buloh, Selangor.

The land is currently vacant and the category of land use is residential.

We understand that MK Land and the JV partner would change the land use into a mixed development. The JV partner will be responsible for approvals, sales and marketing, construction and development works, among other things. The development period is expected to be six years.

Land cost of RM82.1 million, RM160 per sq ft (psf) is 39% higher than the RM115 psf that Mammoth Empire paid for 48.7 acres back in 2010, but was lower than the similar land deal that was transacted at RM200 psf (9.6 acres) in April 2013.

That said, MK Land could potentially receive a higher land price as it is entitled to 22% of the gross development value or a minimum of RM82.1 million.

The next catalyst in our view will come from launching more projects, especially at the group’s crown jewel, Damansara Perdana, to maximise returns from its prime land bank.

The latest land deal is expected to strengthen the balance sheet further, and hence potentially more cash dividends for shareholders. — Public Bank Investment Bank, Feb 4

This article first appeared in The Edge Financial Daily, on February 5, 2015.