Bigger stake in Bandar Rimbayu - IJMLAND

by **Cals** Wed 14 Aug 2013, 09:46

Bigger stake in Bandar Rimbayu
Business & Markets 2013
Written by Affin IB Research
Wednesday, 14 August 2013 09:05

IJM Land Bhd
(Aug 13, RM2.79)
Maintain buy at RM2.80 with a target price of RM3.77: IJM Land announced that its wholly owned subsidiary, IJM PROPERTIES [] Sdn Bhd, had on Aug 12 entered into a conditional share sale agreement with KEB Builders Sdn Bhd (a subsidiary of KUMPULAN EUROPLUS BHD []) for the acquisition of 10% equity interest in Radiant Pillar Sdn Bhd for a cash consideration of RM52.5 million.

Radiant Pillar, the developer of the 1,878-acre (760ha) Bandar Rimbayu, is currently a 50:50 jointly controlled entity between IJM Land and KEB Builders. The proposed acquisition will enable IJM Land to increase its equity interest to 60% and allow it to consolidate the results of Radiant Pillar upon completion of the proposed acquisition.

We are positive on the acquisition because: (i) we estimate that the proposed transaction prices the Bandar Rimbayu land at RM16.30 per sq ft (psf), an attractive valuation in view of the project's location, sizeable gross development value (GDV) of RM12 billion, status of development and the current market environment (in one of the latest transactions of sizeable Klang Valley land bank, GAMUDA BHD [] paid RM19.65 psf for 724.3 acres of leasehold land in Rawang); (ii) we are positive on the prospects of Bandar Rimbayu. The project has a GDV of RM12 billion and IJM Land has received overwhelming response for Phase 1 (526 units of terraced houses) which was launched in early 2013 at approximately RM580,000-RM640,000 per unit; and (iii) IJM Land will recognise an estimated net gain of RM231 million arising from the re-measurement of the group's existing equity interest of 50% in Radiant Pillar to its fair value as at June 30, 2013.

We make no change to our earnings forecast for now, pending further details on Radiant Pillar's financial statement (that is, borrowings). The impact of Radiant Pillar's consolidation on our 2014 financial year (FY14) to FY16 revenue forecast (+8 to 22%) will be significant although the additional 10% stake will only enhance our FY14 to FY16 core earnings per share by 2% to 3%. Maintain "buy" on IJM Land with an unchanged target price of RM3.77 (parity to revised net asset value).

IJM Land (alongside Sunway Bhd) is our top pick for the property sector. We like IJM Land for its strong management, good brand equity, good geographical diversification, excellent product mix, impressive 31% earnings compound annual growth rate over FY13 to FY16E and undemanding valuation. – Affin IB Research, Aug 13

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This article first appeared in The Edge Financial Daily, on August 14, 2013.