Tuesday, September 20, 2011

AmResearch maintains Hold on BRDB

KUALA LUMPUR: AmResearch reaffirms its HOLD rating on BANDAR RAYA DEVELOPMENTS BHD []'' (BRDB) with its fair value unchanged at RM2.45 a share, pegging it to a 30% discount to its fully diluted net asset value (NAV) estimate of RM3.50 a share.

It said on Tuesday, Sept 20 that BRDB announced it had agreed to dispose of four assets ' (i) CapSquare Retail Centre (ii) Permas Jusco Mall (iii) Bangsar Shopping Centre (BSC) and (iv) Menara BRDB ' to Ambang Sehati, for a combined value of RM914 million.

The consideration value includes RM484 million net liabilities related to BSC and Menara BRDB to be assumed by the purchaser. This works out to RM1,000 psf for the four assets.

BRDB would require shareholders' approval and the deal should be completed by 1Q2012.

Following the proposed disposal, the group plans to distribute RM390 million from the assets sale to shareholders via a net cash dividend of 80 sen a'' share, comprising a two-tier gross dividend of RM0.88/share (net of tax 66 sen a'' share) and a single-tier dividend of 14 sen a share.

Apart from the dividends, the group plans to use RM302 million to settle its outstanding debt.

'Based our estimates, BRDB's gearing would be reduced to 0.4 times from 0.7 times as at end of December 2010,' it said.

AmResearch said while the proposed dividends are attractive for minority shareholders, we believe the cash proceeds are better off deployed for landbanking purposes or to fund its future developments, especially when its property development unit has been lacklustre due to delay in launches.

This is also true especially so in the current global economic climate.

'We would expect the group to be more aggressive in property launches now that jewel in the crown i.e. BSC would be disposed of. We estimated these four PROPERTIES [] would have contributed about 20%-25% to our EBIT projection for FY12F-FY13F with BSC making up the bulk of it,' it said.

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