Benalec Holdings Bhd (Nov 11, RM1.35)
Maintain buy with revised fair value RM2.85 from RM2.22: We maintain our “buy” call on Benalec Holdings Bhd and raise our fair value from RM2.22 per share to RM2.85 per share — based on our revised sum-of-parts value under our base case assumption for its new ventures in Johor.
Benalec has announced to Bursa Malaysia it has secured the rights to reclaim and own two large tracts of prime seafront land — at Tanjung Piai (3,485 acres or 1,410.3ha) and Pengerang (1,760 acres) on the southern tip of Johor.
The group is leveraging its core competencies in marine construction to create strategically located land with a water depth of more than 15m for the oil and gas and maritime industries.
These transformational deals — leveraging highly industrialised developments — will be very significant over the next 10 to 15 years.
In the immediate term, Benalec’s primary focus will be on the 2,000 acres under Phases 1 and 2 in Tanjung Piai. Its development potential as an oil and gas hub is high due to its strategic location within the busy Straits of Malacca and close proximity to Singapore.
Tanjung Piai is earmarked to complement the vibrant petrochemical hub on Jurong Island, which is already overcrowded. The key success factors are land arbitrage, deepwater depth (more than 20m deep), easy access for very large crude carriers (VLCC) and a large hinterland. In gauging the potential development value of Tanjung Piai, the latest land cost in Jurong Island is about S$116 (RM285) per sq ft.
But, the litmus test is in securing off-takers for the land. This will act as the primary catalyst for Benalec’s share price, we believe. Construction on Phase 1 is scheduled to commence by end-2Q12, as we expect the group to secure a major off-taker that would act as a trailblazer sometime soon.
We are not unduly concerned about the funding for Phases 1 and 2 of Tanjung Piai (estimated at RM400 million through a mixture of new debt/equity) that will likely be partly used for the payment of land premiums. The reclamation would be executed in stages once Benalec has secured off-takers without stretching its cash flows.
We have raised FY13F/FY14F net profit forecasts by 21% to 23%, anchored on our base case assumptions of 2,000 acres in Tanjung Piai, pre-tax margins of 28% to 30% and a higher new order book target of RM0.9billion to RM1billion (+12% and +25%).
Benalec is a cheaper but early-stage play on the repositioning of south Johor as an emerging oil and gas hub. Valuations are compelling at FY12F/FY14F price-earnings ratio of only five times. — AmResearch, Nov 11
This article appeared in The Edge Financial Daily, November 14, 2011.
Maintain buy with revised fair value RM2.85 from RM2.22: We maintain our “buy” call on Benalec Holdings Bhd and raise our fair value from RM2.22 per share to RM2.85 per share — based on our revised sum-of-parts value under our base case assumption for its new ventures in Johor.
Benalec has announced to Bursa Malaysia it has secured the rights to reclaim and own two large tracts of prime seafront land — at Tanjung Piai (3,485 acres or 1,410.3ha) and Pengerang (1,760 acres) on the southern tip of Johor.
The group is leveraging its core competencies in marine construction to create strategically located land with a water depth of more than 15m for the oil and gas and maritime industries.
These transformational deals — leveraging highly industrialised developments — will be very significant over the next 10 to 15 years.
In the immediate term, Benalec’s primary focus will be on the 2,000 acres under Phases 1 and 2 in Tanjung Piai. Its development potential as an oil and gas hub is high due to its strategic location within the busy Straits of Malacca and close proximity to Singapore.
Tanjung Piai is earmarked to complement the vibrant petrochemical hub on Jurong Island, which is already overcrowded. The key success factors are land arbitrage, deepwater depth (more than 20m deep), easy access for very large crude carriers (VLCC) and a large hinterland. In gauging the potential development value of Tanjung Piai, the latest land cost in Jurong Island is about S$116 (RM285) per sq ft.
But, the litmus test is in securing off-takers for the land. This will act as the primary catalyst for Benalec’s share price, we believe. Construction on Phase 1 is scheduled to commence by end-2Q12, as we expect the group to secure a major off-taker that would act as a trailblazer sometime soon.
We are not unduly concerned about the funding for Phases 1 and 2 of Tanjung Piai (estimated at RM400 million through a mixture of new debt/equity) that will likely be partly used for the payment of land premiums. The reclamation would be executed in stages once Benalec has secured off-takers without stretching its cash flows.
We have raised FY13F/FY14F net profit forecasts by 21% to 23%, anchored on our base case assumptions of 2,000 acres in Tanjung Piai, pre-tax margins of 28% to 30% and a higher new order book target of RM0.9billion to RM1billion (+12% and +25%).
Benalec is a cheaper but early-stage play on the repositioning of south Johor as an emerging oil and gas hub. Valuations are compelling at FY12F/FY14F price-earnings ratio of only five times. — AmResearch, Nov 11
This article appeared in The Edge Financial Daily, November 14, 2011.
