Hot Stock Guocoland at 6-year high on undervaluation, shares seen overbought

by **Cals** Tue 12 Aug 2014, 22:57

Hot Stock Guocoland at 6-year high on undervaluation, shares seen overbought

Business & Markets 2014

Written by Jonathan Gan of theedgemalaysia.com

Tuesday, 12 August 2014 16:39

KUALA LUMPUR (Aug 12): Guocoland (M) Bhd rose as much as 14% to its highest in more than six years as investors perceived the property developer's shares as undervalued.

Guocoland rose as much as 25 sen to RM2.02, the stock's highest since March 12, 2008, Bloomberg data showed. At 3.20pm today, Guocoland reduced gains to trade at RM1.95 with some 24 million shares traded.

The stock was traded at RM1.94 at 4.49pm.

“The market is hungry for trading ideas at the moment and investors are looking out for under-researched counters like Guocoland,” an analyst toldtheedgemalaysia.com today.

The comments followed a recent Kenanga Investment Bank Bhd report, which indicated that Guocoland shares were undervalued versus the developer's revised net asset value (RNAV) of RM5.89 a share.

Kenanga analyst Sarah Lim said then Guocoland's RNAV was driven by revaluation on its landbank, investment property, and inventory value to market prices.

“We derive an RNAV of RM5.89 and assume a steep 50% discount (higher than our average discount applied on developers of 31%) to derive a target price of RM2.95. We recommend that investors buy on weakness as we strongly believe that Guocoland is severely undervalued.

“Our valuations are conservative as we are opting for land-driven RNAVs rather than assuming full development value of each landbank,” Lim said.

Bursa Malaysia had on July 31 this year queried Guocoland on its share trading activity.