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This article first appeared in The Edge Financial Daily, on April 15, 2016.

 

mklandr_fd_150416

MK Land Holdings Bhd
(April 14, 37 sen)
Maintain outperform with target price (TP) of 50 sen:
MK Land Holdings Bhd’s unbilled sales are now at RM150 million from RM200 million previously. The current difficult trading environment would make it challenging to sell properties. That said, we understand that it is considering selling its properties en bloc to minimise selling risks, albeit at potentially lower margins. 

MK-Land_chart_fd_150416

As for unsold stocks, we understand that it still has RM100 million unsold units from Armanee Terrace and RM600 million from the remaining phases of its The Rafflesia semi-detached homes. Sales are still very slow but we understand that the group is considering changing the mix into more marketable products such as super-link houses.

After the recent land sale that was completed in financial year ended June 30, 2015 (FY15), land disposal also slowed down for the group. As we said in our earlier report, MK Land is planning to sell its Setiawangsa land valued at RM96 million or RM40 per sq ft (psf). MK Land believes the market value is higher now at RM70 psf or RM168 million for the 55 acres (22.25ha) of land (or as high as RM83 psf or RM200 million in recent reports). Elsewhere, it has also another five-acre land in Damansara Perdana that could be offloaded for RM500 psf. 

In our revised net asset value (RNAV) estimates, we estimate the land in Setiawangsa at RM40 psf and residential land in Damansara Perdana at RM200 psf.

Maintain “outperform” but we lower our TP to 50 sen after imputing a higher (70%) discount to our RNAV estimate. The current weak market environment could see the group’s earnings drop further if there is no new project or land sale. 

In addition, we believe that the group’s asking price on the land for sale is on the high side, and hence might take longer than expected. As such, with no key earnings drivers, we believe its earnings would be under pressure in the near term. All told, we revised downwards our forecasts for FY16 (FY16F), FY17F and FY18F by -40%/-36%/-29% respectively to account for the billing assumption changes due to the delay of the new project. — PublicInvest Research, April 14

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