SHL has land bank and properties worth some RM1b in market value

by **Cals** Wed 23 Jul 2014, 13:08

Business & Markets 2014

Written by PublicInvest Research

Wednesday, 23 July 2014 09:51

SHL Consolidated Bhd
(July 22, RM2.70)
Non-rated with target price of RM4.26: SHL, the well-known master developer of Bandar Sungai Long in Selangor, has been sitting on low-cost land bank in suburb areas with good accessibility and huge potential development value.

Underpinned by the limited and expensive developments in and around the Klang Valley, we see stronger demand shifting towards the suburbs, which bodes well for the company. Based on our valuation, we opine the company could be worth at least RM1 billion or RM4.26 per share.

The group owns about 433 acres (175.23ha) of land bank (for property development purposes) in Selangor and Negeri Sembilan. Besides Bandar Sungai Long (48 acres), it also owns land in Semenyih (118 acres), Alam Budiman (20 acres), Rawang (10 acres) Batang Kali (88 acres), Serendah (48 acres) and Parit Tinggi (101 acres).

However, the most interesting part is its 160-acre golf course land in Bandar Sungai Long, sitting on a book value of RM18 per sq ft (psf). Management had earlier hinted its interest in redeveloping and monetising the golf course. Based on the market value of RM130 psf, we believe this piece of land could be worth at least RM900 million given the matured township status in Bandar Sungai Long.

Currently, we think its land bank and properties stand at a market value of not less than RM1 billion and could double to RM2 billion (if the redevelopment plan kicks in), which is a far cry from its current market capitalisation of RM561 million.

SHL’s balance sheet and operating cash flow are solid. As at financial year 2014 ended March 31 (FY14), it had net cash and short-term liquid investments of RM306 million or RM1.27 per share.

The group has been paying out generous dividend with a minimum of eight sen per annum (60% payout) in the last five years, which translates into a 3.5% dividend yield. It recently announced a final dividend of five sen for FY14, bringing the total dividend for the full year to 19 sen, equivalent to an 83% payout of total earnings. — PublicInvest Research, July 22

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This article first appeared in The Edge Financial Daily, on July 23, 2014.[/size]