Stock Name: MAGNA
Company Name: MAGNA PRIMA BHD
Research House: HWANGDBS
Magna Prima Bhd
(March 24, RM1.02)
Not rated, 12-month price target of RM1.30: The company is repositioning as a niche property developer. Magna Prima was recently reclassified under the property sector on Bursa Malaysia, in line with its repositioning as a niche developer that focuses on high-value, small pockets of land in the Klang Valley. Following a change in top management in 2009, Magna Prima went on an acquisition spree to boost its landbank.
Magna Prima saw a major change in its management team last year with the resignation of its group managing director and CEO. The appointment of a new CEO and chief operating officer with vast experience in property development, investment and merchant banking is expected to steer Magna Prima forward.
Magna Prima has an aggressive launch pipeline, with plans for six projects worth RM1 billion by 2011, comprising gated landed residential and commercial developments in the Klang Valley (including the RM90 million One Jalil residential project which land acquisition is under litigation).
First off the block will be One Sierra, Selayang, in April with gross development value (GDV) RM150 million.
Its high-end condo project near the KLCC is expected to come on stream after 2013 (post-relocation of Lai Meng school pending approval from the education ministry). A potential joint-venture partner may be required given the massive size (GDV RM1 billion) and target market.
Cash flow management and cost control will be crucial. We expect Magna Prima's net gearing to balloon to 171% from 10% currently, due to recent land acquisitions and working capital requirements. This could decline to 130% by 2012 with improved operating cash flows. With an internal construction arm, there should be better management of cost, quality and execution. Land replenishment may be a concern given the aggressive launch plans and tight cash flow.
The valuation of Magna Prima shares is attractive, but launches may be delayed. It is currently trading at 55% discount to revised net asset value (RNAV), in line with small-cap developers. We value Magna Prima at RM1.30 based on 40% discount to its RM2.17 RNAV. If we exclude contribution from the Lai Meng high-end condos, its RNAV would be RM1.52.
Magna Prima may have one of the strongest earnings growth in the sector given its small base (three-year compound annual growth rate of 111%), but most of its recent land acquisitions have not been completed, which may result in delayed launches (we assumed most of its launches would be in 2011). - HwangDBS Vickers Research, March 24
This article appeared in The Edge Financial Daily, March 25, 2010.
Company Name: MAGNA PRIMA BHD
Research House: HWANGDBS
Magna Prima Bhd
(March 24, RM1.02)
Not rated, 12-month price target of RM1.30: The company is repositioning as a niche property developer. Magna Prima was recently reclassified under the property sector on Bursa Malaysia, in line with its repositioning as a niche developer that focuses on high-value, small pockets of land in the Klang Valley. Following a change in top management in 2009, Magna Prima went on an acquisition spree to boost its landbank.
Magna Prima saw a major change in its management team last year with the resignation of its group managing director and CEO. The appointment of a new CEO and chief operating officer with vast experience in property development, investment and merchant banking is expected to steer Magna Prima forward.
Magna Prima has an aggressive launch pipeline, with plans for six projects worth RM1 billion by 2011, comprising gated landed residential and commercial developments in the Klang Valley (including the RM90 million One Jalil residential project which land acquisition is under litigation).
First off the block will be One Sierra, Selayang, in April with gross development value (GDV) RM150 million.
Its high-end condo project near the KLCC is expected to come on stream after 2013 (post-relocation of Lai Meng school pending approval from the education ministry). A potential joint-venture partner may be required given the massive size (GDV RM1 billion) and target market.
Cash flow management and cost control will be crucial. We expect Magna Prima's net gearing to balloon to 171% from 10% currently, due to recent land acquisitions and working capital requirements. This could decline to 130% by 2012 with improved operating cash flows. With an internal construction arm, there should be better management of cost, quality and execution. Land replenishment may be a concern given the aggressive launch plans and tight cash flow.
The valuation of Magna Prima shares is attractive, but launches may be delayed. It is currently trading at 55% discount to revised net asset value (RNAV), in line with small-cap developers. We value Magna Prima at RM1.30 based on 40% discount to its RM2.17 RNAV. If we exclude contribution from the Lai Meng high-end condos, its RNAV would be RM1.52.
Magna Prima may have one of the strongest earnings growth in the sector given its small base (three-year compound annual growth rate of 111%), but most of its recent land acquisitions have not been completed, which may result in delayed launches (we assumed most of its launches would be in 2011). - HwangDBS Vickers Research, March 24
This article appeared in The Edge Financial Daily, March 25, 2010.
No comments:
Post a Comment