MK Land going through a ‘lull period’
KUALA LUMPUR: MK Land Bhd (MK Land) is going through a ‘lull period’ amidst the group deferring the launch of a proposed new launch and experiencing thinning unbilled sales, analysts say.
According to the research arm of Public Investment Bank Bhd (PublicInvest Research) in a company update, a meeting with management revealed that the group’s proposed new project in Damansara Damai has not been launched as yet.
“We understand that the deferment is mainly is due to current weak market conditions,” it said.
PublicInvest Research noted that the new project was initially thought to be launched by early2016.
It further noted that now, MK Land has deferred the launch to the first half of 2016 (1H16).
PublicInvest Research recalled that the new project which is sitting on 6.56 acres of land located in Damansara Damai, has an estimated gross development value (GDV) of RM400 million.
The research arm pointed out that prices start at RM450,000 for a 1,015 square foot (sqft) unit.
“Elsewhere, the other proposed launch in the pipeline is the 17-acre development (three phases, circa RM500 million GDV) in Damansara Perdana, but the timing is sketchy at this juncture,” it said.
On the group’s unbilled sales, PublicInvest Research highlighted that it is now at circa RM150 million from circa RM200 million previously.
The research arm noted that current difficult trading environment would make it challenging to sell properties,
“That said, we understand that it is considering selling its properties en-bloc to minimise selling risks albeit at potentially lower margins.”
“As for unsold stocks, we understand that it still has circa RM100 million unsold units from Armanee Terrace and circa RM600 million from the remaining phases of the semi-detached ‘The Rafflesia’. “Sales are still very slow but we understand that the group is considering changing the mix into more marketable products such as super link houses,” the research arm said.
On a side note, PublicInvest Research said that after recent the land sale that was completed in financial year 2015 (FY15), land disposal also slowed down for the group.
As reported earlier, the research arm pointed out that MK Land has plans to sell the group’s Setiawangsa land valued at circa RM96 million or RM40 per square foot (psf).
“MK Land believes that the market value is higher now at RM70psf or RM168 million for the 55 acres land (or as high as RM83psf or RM200 million in recent reports).
“Elsewhere, it has also another five-acre land in Damansara Perdana that could be offloaded for circa RM500psf,” PublicInvest Research said.
In its revalued net asset valuation (RNAV) estimates, the research arm estimated the land in Setiawangsa at RM40psf and residential land in Damansara Perdana at RM200psf.
All in, PublicInvest Research maintained ‘outperform’ on MK Land.
“The current weak market environment could see the group’s earnings to drop further if there is no new project or land sale,” the research arm said.
“In addition, we believe that the group’s asking price on the land for sale is on the high side, and hence might take long than expected.”
As such, with no key earnings drivers, PublicInvest Research believed MK Land’s earnings to be under pressure in the near term.
All told, the research arm revised downwards its FY16F-18F by 40, 36, and 29 per cent respectively to account for the billing assumptions changes due to the delay of the new project.