SELANGOR PROPERTIES BHD

By CIMB Research Rating: Hold Target Price: RM5.12

CIMB Research has initiated coverage on Selangor Properties Bhd with a “hold” call, stating that most of the property investment and development company’s value rests in its land bank.

The research house said the company is “sitting on gold” with its 42 acres of prime land bank in Damansara Heights and Bukit Tunku, two prestigious addresses in Kuala Lumpur. It also owns 242 acres in Gombak, Selayang and Ulu Langat, all located in the suburbs of the Klang Valley.

CIMB Research estimates that the land bank is collectively worth RM1.8bil, or 51% of the group’s total revalued net asset value (RNAV).

“The company is also the owner of six investment properties in Kuala Lumpur and Perth, Australia.

“We estimate these investment properties’ fair value at about RM1bil, accounting for 21% of Selangor Property’s RNAV,” it said.

Beyond this, the company had a net cash balance and financial assets worth RM775mil as at Oct 2016, making up 22% of its RNAV.

The research house expects most of the units in the RM870mil AIRA Residence project in Damansara Heights, launched in late financial year 2016 (FY16), to be sold during its four-year development period, due to its prime location and niche market focus.

This is despite the average price tag of RM1,700 per sq ft and minimum price of close to RM5mil per unit.

“We believe AIRA will boost Selangor Property’s development earnings in FY17FY20. However, AIRA’s site is only about three acres, representing less than 10% of all of its land bank in Damansara Heights,” it said, adding that the company was planning to undertake further development there.