Berjaya Land Bhd
Continuing our discussion on conglomerate Berjaya Group, we take a closer look at another subsidiary — Berjaya Land Berhad.

BLand is involved in hotel, resort, recreation development and vacation timeshare as well as property investment and development. It also has a 41% stake in Berjaya Sports Toto, which we have discussed previously (refer TEFD October 4, 2014). Some of the notable hotels within its stable are the Berjaya Times Square Hotel and Berjaya Langkawi Resort in Malaysia as well as Berjaya Eden Park in London.

The company’s earnings have been erratic from year to year despite steadily increasing revenue. For instance, net profit fell from RM73 million in FYApril2012 to RM33 million in FY13 before recovering to RM105 million in FY14. Based on trailing 12-mth earnings, the stock is now trading at a hefty P/E of 109 times. Unless the company can boost earnings considerably, and hence driving P/E multiples lower, upside for the stock may be limited.

However, the stock is trading at 0.8 times its book value of RM1.08. This suggests that a feasible alternative to enhance shareholder value is to spinoff some of its assets.

One possibility is to set up a real estate investment trust (REIT) consisting of its myriad hotels/resorts. Currently, there is only one other hospitality-focused REIT on Bursa Malaysia, under the YTL Group.

This would allow BLand to unlock the value of its hotels while still retaining control over them — and raise some cash at the same time. The latter could, in turn, bolster working capital for the development of its landbank in the Gombak and Johor areas — thereby creating further value for shareholders. These landbank is carried at book and has not been revalued since 1997.

This article first appeared in The Edge Financial Daily, on November 6, 2014.