TRX land purchase sends Affin shares to three-year low

Affin-Holding

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KUALA LUMPUR (Aug 11): Affin Holdings Bhd, which is acquiring a tract of land measuring 54,266 sq ft in the Tun Razak Exchange (TRX) here, saw its share price slide to a three year low in early trades today.

At 10.35am, the shares of the financial institution was traded at RM2.39, down four sen or 1.65% with 227,000 shares done after dipping to its three-year intraday low of RM2.38 earlier.

With the current price, it has a market capitalisation of RM4.66 billion.

Affin Holdings said at a press conference yesterday that its banking unit Affin Bank Bhd is acquiring a tract of land in TRX to develop its new headquarters, for RM255 million, or RM4,699.07 per sq ft.

According to Affin Bank managing director and chief executive officer Kamarul Ariffin Mohd Jamil, the development will have a gross floor area (GFA) of 823,439 sq ft and a purchase price of RM255 million.

That means the price per gross floor area would be RM309.67 per sq ft, while the plot ratio will be 15.2 times.

He added that the land has been independently valued at RM261 million.

Commenting on the land deal, Hong Leong Investment Bank Research (HLIB Research) noted the acquisition price is on the high side given its price on a per sq ft basis.

According to HLIB Research, Affin's purchase price of RM4,699 per sq ft was higher than recent transactions, including Malaysian Resources Corp Bhd (MRCB)'s acquisition of German Embassy land at RM3,182 per sq ft in April 2015, Lembaga Tabung Haji's (TH) acquisition of land in TRX for RM2,780 per sq ft and Mulia Group's acquisition of land in TRX for RM4,490 per sq ft in May 2015.

"When compared with price per GFA, RM309.67 is also higher than TH's transaction of RM264.94 albeit the TH's land has a lower plot ratio of 10.47 times," it added.

HLIB Research pointed out while financial impact is limited, high acquisition price could raise concerns among investors, especially amid current low investors' sentiment.

The firm is maintaining its "hold" call with a lower target price of RM2.93 based on 20% discount to Gordon Growth in view of potential concerns about governance and the quarter-on-quarter increase in impaired loans ratio.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)