Investment in Hillcrest a good cash opportunity for PPB
KOTA KINABALU: PPB Group Bhd's (PPB) investment in a stake at Hillcrest Gardens Sdn Bhd (Hillcrest) has been viewed positively by analysts as the move represents a good opportunity for PPB to better utilise its cash.
In a filing to Bursa Malaysia on Thursday, PPB announced that it has entered a sale and purchase agreement (SPA) with Lembaga Tabung Angkatan Tentera for the proposed acquisition of 3.281 million ordinary shares or 16.8 per cent equity interest in Hillcrest for a total cash consideration of RM59.062 million.
Kuok Brothers Sdn Bhd (KBSB) currently owns 51.9 per cent stake in Hillcrest.
“We believe that the investment in Hillcrest represents a good opportunity for PPB to better utilise its cash.
“Note that PPB has net cash of RM558 million as of end-of the financial year 2017 (FY17). We expect Hillcrest to launch its property development in less than three years as Taman Puchong Utama is a mature area, hence high likelihood of good take up rate,” MIDF Amanah Investment Bank Bhd's research arm (MIDF Research) said in a report.
It noted that the deal values Hillcrest at RM351.6 million.
“As Hillcrest owns in total 147.78 acres of land, valuation is RM55 per square foot. Out of the total 147.78 acres of land, 85.84 acres are located at Taman Puchong Utama.
“The remaining 61.94 acres are located at Taman Seri Gombak. In view of the strategic location of these lands, we believe that the valuation is fair as it is within the range of market price for these areas,” it opined.
All in, MIDF Research maintained its FY18 earnings estimate of RM1.13 billion and it also maintained its FY19 earnings estimate of RM1.15 billion.
“Earnings contribution from Hillcrest is expected to kick in earliest from FY2021 onwards,” it noted.
Seperately, the positive newsflow surrounding potential Wilmar's China operations IPO should keep its share price uptrend intact and hence, MIDF Research maintained its ‘buy' call.
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