We are initiating coverage on Selangor
Properties Bhd (SPB) with a Buy recommendation. SPB operates 3 major business
segments, namely: 1) property investment, 2) property development, and 3)
investment holdings. We like the group’s prized assets in Damansara Heights and
believe it is entering a new chapter with the launch of Aira Residence. SPB is
more than just an undervalued property company and we believe it will draw
greater investor recognition over time. Based on a target FY18 P/B multiple of
0.8x, we value SPB at RM5.98.
Investment Case
- Owns prized assets in Damansara
Heights
- Entering a new chapter with the
launch of Aira Residence
- Undervalued with strong balance
sheet
Key Risks
- Perception of a boring and
unexciting company
- Foreign currency risk
Forecasts
Our FY17/18/19 earnings projections are
premised on the following assumptions
- FY17/18/19 property sales of
RM340mn/RM370mn/RM430mn respectively, with a blended EBIT margin
assumptions of 20%.
- Overall portfolio occupancy rate
of 95% with an average rental growth of 3% p.a.
Valuation
In our opinion, SPB is more than just
an undervalued property company. While the company has been quieter than other
property peers such as SP Setia, Eco World, Mah Sing and Sunway, we think SPB
has and will be able to continue generating decent returns for shareholders. We
also believe it is entering a new phase in its business operations, which would
draw greater investor recognition over time. Based on a targeted FY18 P/B
multiple of 0.8x, we value SPB at RM5.98. We are initiating
coverage on the company with a Buy recommendation.
Reference: - http://www.mmfsolutions.my/
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