Benalec Holdings Bhd (Nov 14, RM1.40)
Maintain buy with fair value of RM2.85: Maintain “buy” on Benalec Holdings with an unchanged sum-of-parts-derived fair value of RM2.85 per share. Benalec held an analysts’ briefing last Friday to highlight its success in securing the rights to reclaim and own two large tracts of land in South Johor — Tanjung Piai (3,485 acres) and Pengerang (1,760 acres).
We came away from the briefing feeling more encouraged about Benalec’s future prospects. The response to the briefing was overwhelming with over 50 analysts and fund managers attending. To be sure, Business Times reported that the Johor project may fetch a combined gross development value (GDV) of RM20 billion over the next 10 to 15 years.
The immediate focus, however, will be on harnessing the development potential of its Tanjung Piai landbank. Specifically, Benalec is working hard to monetise 2,000 acres under Phases 1 & 2. This piece of land has deep development appeal as a future oil hub because of its natural deepwater characteristics and strategic location adjacent to the vibrant petrochemical hub in Jurong.
The Johor project is scheduled to kick off by end-2Q12, implying that contributions will filter through from FY13F onwards. Having received approval in principle from the Johor government, Benalec is intensifying efforts to market the land, particularly to the oil and gas (O&G) and petrochemical incumbents in Jurong, Singapore.
The management expressed its confidence in the viability of its other landbank in Pengerang, although development will likely track the progress of Petroliam Nasional Bhd’s ambitious RM60 billion refinery and petrochemicals integrated development (Rapid) initiative. Financing risk for the project will be reduced by: (i) back-to-back execution of reclamation with off-takers; and (ii) potential structuring of upfront payments upon issuance land titles.
To be sure, net gearing is forecast to improve from 0.7 times in FY12F to 0.6 times and 0.3 times in FY13F and FY14F.
Our current forecast for Benalec is only anchored on the 2,000-acre Tanjung Piai Phases 1 & 2 with land sales of 300 acres each over the next two years. Yet, the earnings impact is already significant with FY13F net profit forecasts at RM169 million (+51%) and FY14F at RM216 million (+27%) on pre-tax margins of 28% to 30%.
Trading at fully diluted FY12F to FY14F price-earning ratios (PER) of only five and 10 times against robust earnings per share compound annual growth rate of 27%, Benalec is an attractive play on the repositioning of South Johor as an emerging O&G hub.
The stock is poised for a significant PER re-rating upon contract delivery, with a maiden off-taker possibly in the offing soon. — AmResearch, Nov 14
This article appeared in The Edge Financial Daily, November 15, 2011.
Maintain buy with fair value of RM2.85: Maintain “buy” on Benalec Holdings with an unchanged sum-of-parts-derived fair value of RM2.85 per share. Benalec held an analysts’ briefing last Friday to highlight its success in securing the rights to reclaim and own two large tracts of land in South Johor — Tanjung Piai (3,485 acres) and Pengerang (1,760 acres).
We came away from the briefing feeling more encouraged about Benalec’s future prospects. The response to the briefing was overwhelming with over 50 analysts and fund managers attending. To be sure, Business Times reported that the Johor project may fetch a combined gross development value (GDV) of RM20 billion over the next 10 to 15 years.
The immediate focus, however, will be on harnessing the development potential of its Tanjung Piai landbank. Specifically, Benalec is working hard to monetise 2,000 acres under Phases 1 & 2. This piece of land has deep development appeal as a future oil hub because of its natural deepwater characteristics and strategic location adjacent to the vibrant petrochemical hub in Jurong.
The Johor project is scheduled to kick off by end-2Q12, implying that contributions will filter through from FY13F onwards. Having received approval in principle from the Johor government, Benalec is intensifying efforts to market the land, particularly to the oil and gas (O&G) and petrochemical incumbents in Jurong, Singapore.
The management expressed its confidence in the viability of its other landbank in Pengerang, although development will likely track the progress of Petroliam Nasional Bhd’s ambitious RM60 billion refinery and petrochemicals integrated development (Rapid) initiative. Financing risk for the project will be reduced by: (i) back-to-back execution of reclamation with off-takers; and (ii) potential structuring of upfront payments upon issuance land titles.
To be sure, net gearing is forecast to improve from 0.7 times in FY12F to 0.6 times and 0.3 times in FY13F and FY14F.
Our current forecast for Benalec is only anchored on the 2,000-acre Tanjung Piai Phases 1 & 2 with land sales of 300 acres each over the next two years. Yet, the earnings impact is already significant with FY13F net profit forecasts at RM169 million (+51%) and FY14F at RM216 million (+27%) on pre-tax margins of 28% to 30%.
Trading at fully diluted FY12F to FY14F price-earning ratios (PER) of only five and 10 times against robust earnings per share compound annual growth rate of 27%, Benalec is an attractive play on the repositioning of South Johor as an emerging O&G hub.
The stock is poised for a significant PER re-rating upon contract delivery, with a maiden off-taker possibly in the offing soon. — AmResearch, Nov 14
This article appeared in The Edge Financial Daily, November 15, 2011.
