Sunday, December 30, 2007

Pessimism Over B Land

I am trying to do a Moola here on B Land (lol). B Land is the kind of stock that can cause people who invested earlier to fall in love with it.

False Positives

1) Reputable foreign shareholders in UBS Ag (12%) and Goldman Sachs (8%). These lends some sort of credibility in the eyes of investors but that's because finding Vietnam plays are difficult. B Land is one convenient vehicle, and these foreign banks have allocated "infra/exotic funds" that they have to have exposure. Hence their presence is not as "qualified" as it seems. These two funds are also in B Land because of the sheer size of B Land. trying to obtain decent exposure is difficult. Now B Land has been ramped up to RM7bn in market cap - hence the reasons behind the investments may be more shallow than you think.


1) It just signed the 8th MOU in Vietnam to develop property projects. Eight MOUs, still MOUs mind you. Talk about execution risks. Each MOU is an additional risk. If you are keen on accretive projects that depend on execution by mgmt, buy KNM, its a safer and proven bet. The numerous projects in Vietnam depends not just on execution by mgmt, but a whole host of economic and social factors, some of which are beyond the control of the company.

2) Vietnam earnings coming in only in 2009. A lot of things can happen till then. The region could have a major slowdown or even a recession.

3) The market price above RM6.00 prices in mainly Vietnam earnings in 2009. Revenue for 2006 and 2007 actual came in at RM561m and RM507m respectively. Net profit for both years came in at RM89m and RM32m respectively. The revenue for 2009 is expected to jump to RM1.49bn and net profit to rise to RM212m. At RM6.40, using 2009 earnings, the stock trades at 27x 2009 earning! If you use current earnings it trades at a higher PER than Google.

4) The most troubling part is in 2008 and 2009, the finance cost are RM280m and RM137m respectively. Comparing to net profits of RM212m for 2009, there is no room for under performance. Revenue may waver in 2009 and beyond, but funding costs are pretty much laid in cement.

5) NTA now is just slightly above RM2.00. Even in 2009, NTA will only reach RM2.90. That's a lot buyers are paying for something a few years down the road.

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