Berjaya Assets Bhd
We conclude our Berjaya Group discussion with a look at Berjaya Assets Berhad. The company is engaged, primarily, in property development and investment properties, including the Berjaya Times Square mall and hotel, Berjaya Waterfront Johor Baru. The latter boasts 400 rooms and suites and features one of the largest MICE facilities in the region, and is situated adjacent to rapidly developing Iskandar Malaysia. Berjaya Assets also owns Natural Avenue Sdn Bhd, which operates number forecast lotteries in Sarawak.

The company reported net profit totalling RM43.9 million for FYJune14, slightly down from the RM45.8 million in the previous financial year. Its shares have fallen from a high of RM1.14 in August to the current 92 sen. Whilst P/E valuations are not cheap, at 23 times trailing 12-month earnings, the stock is priced at less than half its book value of RM1.87.

Similar to our discussion on Berjaya Land yesterday, one possible option for Berjaya Assets to unlock this value is to set up a real estate investment trust (REIT). And a good candidate would be the Berjaya Times Square. With an occupancy rate of 88%, as of June 2013, the mall’s recurring rental income would support the steady dividend payouts required of a REIT.

As a comparison, retail-focused REITs such as Pavillion REIT, IGB REIT and CapitaMall Malaysia Trust are currently priced at between 1.16 and 1.3 times their respective book values — well above the prevailing 0.49 times price-to-book valuation for Berjaya Assets.

In addition, separating the property from the number forecasting business should broaden its appeal, as certain groups of investors are currently barred or choose not to invest in the so-called “sin sector” of gaming.

This article first appeared in The Edge Financial Daily, on November 7, 2014.