Tuesday, April 10, 2007

RB Land, All Potential (Updated)
IJM To Re-engineer The Stock

Update: Pls do not get over-excited over the RM2.06 MGO for RB Land Sdn Bhd, that is NOT for RB Land Bhd (the listed vehicle). RB Land Sdn Bhd is a subsidiary of RB Land Bhd... I am very keen on RB Land Bhd because of the likelihood of one of two options cited below, both will be vg for RB Land Bhd ... for anything to happen to RB Land Bhd, they have to tidy up the strings attached following their takeover Roadbuilder Bhd, which included the need to do the MGO for RB Land Sdn Bhd ... now coast is clear for the next exercise on RB Land Bhd... the build up in volume over the past few days is very good. In particular, investors are keen to know what IJM Corp Bhd's plans are for RB Land now that IJM has taken over Road Builder Holdings Bhd. RB Land is a 70% subsidiary of Road Builder. IJM officials have said they wish to keep RB Land listed. IJM will need to consolidate the property divisions of IJM and Road Builder, as achieving synergies and efficiencies are key goals of the merger between the two groups. If IJM's acquisition of Kumpulan Europlus Bhd goes through, there could be more property assets for IJM to consolidate. RB Land's existing property projects include the Seremban 2 township in Negeri Sembilan and the Shah Alam 2 mixed development in Selangor. RB Land also owns the Holiday Villa Subang hotel. IJM could choose to inject some of its undeveloped land into RB Land. IJM owns close to 30 hectares in Kuala Lumpur. Most of this is commercial land and carry a net book value of more than RM170 million as at March 31, 2006. Being located in Kuala Lumpur, the development value of this land could be lucrative. IJM's property arm, however, is much larger than that. Property assets of the group are valued at more than RM1 billion and property development contributed around RM500 million in revenue and about RM100m in profits for FY2006. They will have to place out shares in RB Land Bhd sooner or later if they want to keep it listed. Hence they will consolidate their property side into RB Land Bhd to create sufficient institutional interest before placing shares out at higher prices. This in turn could facilitate a placement of new RB Land shares to institutional investors and thereby address the tight liquidity issue. The company has 568m shares but only 30% in free float in the most optimistic of guesses (the real free float should be a lot less, maybe less than 10%), hence you are looking at a free float of btw 100m-200m the most. Still, it should be noted that RB Land itself has got some ambitious plans. The company said it plans to launch up to RM987 million worth of property projects in the Klang Valley and Johor over the next three years. These include a RM250 million commercial job on a 3.4ha site in SS2, Petaling Jaya, and a RM320 million mixed development project near Taman Perling in Johor. IJM could very well end up with the property assets of K-Euro and Talam. Judging from the backdrop, a longer term consolidation process could be in the works. With a relatively clean slate, RB Land Bhd could be the boy wonder with the umbrella to hold all these assets. Just the status and stature as IJM's property arm, along with IJM's premium mgmt, would attract substantive interest in that "counter". The safety buffer in buying RB Land Bhd now is that it is still a long way from RB Land Bhd's RNAV of RM1.80. ... So there you go, pls cite sources and do research properly... if not, its a bit embarressing-lah.
When IJM bought Road Builder, the next was always going to be RB Land. IJM is very likely to do one of two things:

1) Take RB Land private because the RNAV of RB Land is above RM1.80 per share, plus the rapid landbank acquisition undertaken by RB Land over the last 2 years have made the company landbank to be very attractive.

2) Inject IJM property & landbank into RB Land. The property side contributes about RM100m in pretax profit compared to RB Land's pretax of RM41m. Bodes well for RB Land.

I would do the first option but IJM may have a bigger strategic plan, which makes it necessary to tap capital and unlock values for IJM at the same time. For a property player, its better to have a seperate listed vehicle away from IJM as the capital raising burden will be redeployed better. It gives a better matching of expenses and income.

The second option would certainly bring about a surge in RB Land's valuation, closer to its RNAV - aggregated landbank, more significant player, and a status as IJM's property arm. Either way, RB Land looks awfully attractive now. Especially with the nice uptrend in volume over the last few days, looking better every day.

6 comments:

SAMMY MU said...

Hi Dali

Thks. Since I'm chart-blind, what's the next price target?

Kudos - all your recommended counters have really performed well.

Salvatore_Dali said...

a deal is a deal, if it happens it will be vg, hard to put a px as it depends on the injection px, offer px, share issue px, discount to RNAV of IJM prop, etc...

Tan said...

earnings dont look too hot, 1st half earnings at ~RM15mln, vs RM20mln last coresponding period.
EPS is around 2.71 sen....

Salvatore_Dali said...

for those who are interested in rb land bhd, pls read the updated article for a clearer perspective

Salvatore_Dali said...

tan,

i said the attraction is in one of two things happening, not on a burst in earnings... both are corporate exercises.. one must look at new mgmt IJM, and the safety buffer is there as the RNAV of RB Land Bhd is RM1.80.

sahamgurl said...

Hi Salvador, a bit OT, but just wondering are u still positive on Mega First? thanks! btw, love reading ur blog