Ibraco’s land acquisition mildly positive

PETALING JAYA: Sarawak-based property developer Ibraco Bhd’s acquisition of the 3.9 acres of leasehold land in Bandar Petaling Jaya Selatan is positive for the group, allowing it to expand its presence in the Klang Valley following its maiden project ContiNew, Jalan Tun Razak.

HLIB Research, which displayed a “mildly positive” sentiment on the acquisition, said the group had acquired the land at a competitive price of RM220 per sq ft that is deemed competitive given the land’s commercial title in the Petaling Jaya area. The land, acquired by Ibraco for RM37.4 million, is under a 99-year lease expiring on Oct 6, 2097.

“Based on the assumption of land cost to gross development value (GDV) ratio of 20%, the potential GDV of RM187 million is expected to increase the group’s total estimated GDV by 3.3% to RM5.9 billion,” the research house said.

“Assuming an earnings before interest and taxes margin of 22%, the GDV is estimated to increase our total Revalued Net Asset Valuation (RNAV) per share by 4 sen or 3% of our target price”, it added.

Meanwhile, the group said in its announcement with the stock exchange that it is yet to determine the budgeted GDV and gross profit to be generated from the development of the land at this juncture.

In 2011, the land was granted a development order (DO) for a mixed commercial development. Ibraco, however, intends to revise the development plan and re-apply for a new DO.

On the back of a strong three-year earnings compound annual growth rate of 42%, healthy unbilled sales of 1.8x, and above industry average margins and attractive dividend yield at 4%, HLIB has maintained its “buy” call on Ibraco shares.

“Our target price is maintained at RM1.00 with upward bias based on total RNAV of RM1.53 and unchanged 35% discount on RNAV for property segment,” it said. Ibraco’s shares were untraded yesterday.