DRB-HICOM BHD

Target price: RM2.76

DRB-Hicom announced the proposed disposal of its non-industrial property assets and its entire hospitality portfolio to Prisma Dimensi and Kelana Ventures Sdn Bhd.

RHB Research noted that the total market value of assets to be disposed totalled RM2bil, compared with the sale consideration of RM1.93bil to be satisfied via 1,243.4 acres of freehold land in Tebrau, Johor Baru and cash of RM288.7mil.

“The RM1.65mil price for the Tebrau land translates to approximately RM30 per sq ft, which we believe is fair.

“The cash proceeds would be used mainly for scheduled repayment for DRB-Hicom’s Islamic medium term notes and expenses relating to the proposed disposals,” it said.

The research house said the proposed acquisition of the Tebrau land marked a change in strategic direction for DRB-Hicom’s property division, which would now focus on the development and sale of industrial properties.

“It has an additional 600 acres of landbank to be developed as industrial parks.

“This landbank is located in Tanjung Malim, Perak; Shah Alam, Selangor; Bukit Kayu Hitam, Kedah; and Alor Gajah, Melaka,” said the research house.

RHB Research pointed out further that its landbank in Johor is situated within the development region of Iskandar Malaysia – close to major townships and served by various highways.

“DRB-Hicom intends to develop the Johor land into a modern industrial zone park comprising terrace factories, semi-detached factories and purpose-built detached factories components.

“This would be together with commercial development, worker hostel complex and community facilities, with an estimated gross development value of RM4.2bil.

“The said proposed development is expected to commence in 2020 over ten years, although these plans are subject to change, given the soft Johor property market,” the research house said.