By Sharon Kong
KUCHING: Analysts are generally positive on Matrix Concepts Holdings Bhd’s (Matrix) acquisition of 164.05-acre freehold land in Labu, Negeri Sembilan for a consideration of RM71.46 million.
According to analyst Loong Kok Wen of RHB Research Institute Sdn Bhd (RHB Research), this land, which is adjacent to Sendayan TechValley’s (STV) southern side, is important to replenish the industrial park landbank, as it is left with only 233 acres, which can be depleted in one to two years.
“The acquisition will be completed by end-2014, and it will be funded via internal funds and borrowings,” the analyst noted.
As the land cost works out to be RM10 per square foot (psf), Loong highlighted that this is in line with the current market price, considering that no further conversion premium is required as the land has already been converted into industrial usage.
“We understand that there are already ready buyers looking to purchase the land plots,” the analyst added.
RHB Research pointed out that according to management, infrastructure cost of only RM2-3 psf, versus RM9 psf for the existing STV, will need to be incurred given the purpose of usage by the potential buyers.
Hence, it noted that with indicative selling prices of RM30 to RM35 psf and gross development value (GDV) of RM170 million, Matrix will be able to make about 50 per cent gross margin by selling the industrial land plots, hence maintaining the overall group’s margin at 35-40 per cent.
It added that the indicative selling price is lower than the ongoing average selling price (ASP) of RM40 to RM45 psf in STV, as the location of the land is further in from the main road.
Overall, Loong highlighted that they made no changes to their financial year 2014-2015 (FY14-15) earnings forecasts.
“We expect the company to achieve RM650-700 million new sales (sales in the first half amounted to RM291 million) in FY14, out of which about RM100 million will come from industrial land sale.
“We believe industrial land sales will be more material next year, given the presence of ready buyers for this new land,” the analyst projected.
As such, RHB Research maintained its ‘buy’ rating on the stock.
Given the incremental value to its revalued net asset value (RNAV) estimate, the research house raised its fair value to RM3.93 per share from RM3.80 per share previously, based on an unchanged 10 per cent discount to RNAV.