Stock Name: BENALEC
Company Name: BENALEC HOLDINGS BERHAD
Research House: MAYBANK
Benalec Holdings Bhd
(Listing on Jan 17, IPO price RM1)
Fair value RM1.95: Benalec, listing on the Main Market today, offers marine construction services (land reclamation, dredging) and vessel chartering which contributed 79:21 to FY10's (June) gross profit. We forecast 56% net profit growth in FY11 and 24% in FY12. Industry outlook is bright and Benalec is in a good position to secure major works. We fairly value the stock at RM1.95 based on sum-of-parts, implying 12.5 times FY12 PER.
Benalec has completed RM468 million worth of marine construction works, but its recent job wins have been sizeable. Outstanding order book stands at RM664 million out of RM856 million in total contract value. The largest reclamation contract worth RM468 million in Melaka has a completion deadline into 2016.
Benalec has also a garnered sizeable landbank (238 acres remaining worth RM197 million, we estimate) which it can monetise. This land is settlement for past land reclamation works under an option for the payments to be in kind.
Benalec predominantly operates in Peninsular Malaysia with completed land reclamation jobs in Langkawi, Port Klang, Johor (Nusajaya's Puteri Harbour) and Melaka. There are few domestic players in land reclamation. Industry barriers include major capital outlay and skilled manpower.
Prospects are positive as reclamation and shoreline protection works will continue at Melaka, Penang, Nusajaya and the East Coast states. Singapore and the regional markets also offer significant opportunities.
1QFY11 reported a net profit was RM30 million on a RM52 million turnover. Based on its current order book and our RM650 million job win assumption over the next 18 months, we forecast RM91 million and RM113 million net profit in FY11 and FY12 respectively. This incorporates a RM17 million gain from a 59-acre land sale in Melaka presently being finalised, which will be recognised in FY11, and our assumption of another RM20 million land sale gain in FY12.
We value the operations on 12 times forward earnings and outstanding landbank at RM19 psf based on the recent land sale pricing. Benalec's marine construction operations are similar to Hock Seng Lee (HSL) for which we have a 'buy' call, with a target 14 times forward PER. As its earnings delivery track record is not as long as HSL's, we peg Benalec's operations at a discount. Benalec's market value is however, expected to be bigger at RM1.43 billion (based on our RM1.95 fair value) versus HSL's RM1.34 billion (at our RM2.30 target price). ' Maybank IB Research, Jan 14
This article appeared in The Edge Financial Daily, January 17, 2011.
Company Name: BENALEC HOLDINGS BERHAD
Research House: MAYBANK
Benalec Holdings Bhd
(Listing on Jan 17, IPO price RM1)
Fair value RM1.95: Benalec, listing on the Main Market today, offers marine construction services (land reclamation, dredging) and vessel chartering which contributed 79:21 to FY10's (June) gross profit. We forecast 56% net profit growth in FY11 and 24% in FY12. Industry outlook is bright and Benalec is in a good position to secure major works. We fairly value the stock at RM1.95 based on sum-of-parts, implying 12.5 times FY12 PER.
Benalec has completed RM468 million worth of marine construction works, but its recent job wins have been sizeable. Outstanding order book stands at RM664 million out of RM856 million in total contract value. The largest reclamation contract worth RM468 million in Melaka has a completion deadline into 2016.
Benalec has also a garnered sizeable landbank (238 acres remaining worth RM197 million, we estimate) which it can monetise. This land is settlement for past land reclamation works under an option for the payments to be in kind.
Benalec predominantly operates in Peninsular Malaysia with completed land reclamation jobs in Langkawi, Port Klang, Johor (Nusajaya's Puteri Harbour) and Melaka. There are few domestic players in land reclamation. Industry barriers include major capital outlay and skilled manpower.
Prospects are positive as reclamation and shoreline protection works will continue at Melaka, Penang, Nusajaya and the East Coast states. Singapore and the regional markets also offer significant opportunities.
1QFY11 reported a net profit was RM30 million on a RM52 million turnover. Based on its current order book and our RM650 million job win assumption over the next 18 months, we forecast RM91 million and RM113 million net profit in FY11 and FY12 respectively. This incorporates a RM17 million gain from a 59-acre land sale in Melaka presently being finalised, which will be recognised in FY11, and our assumption of another RM20 million land sale gain in FY12.
We value the operations on 12 times forward earnings and outstanding landbank at RM19 psf based on the recent land sale pricing. Benalec's marine construction operations are similar to Hock Seng Lee (HSL) for which we have a 'buy' call, with a target 14 times forward PER. As its earnings delivery track record is not as long as HSL's, we peg Benalec's operations at a discount. Benalec's market value is however, expected to be bigger at RM1.43 billion (based on our RM1.95 fair value) versus HSL's RM1.34 billion (at our RM2.30 target price). ' Maybank IB Research, Jan 14
This article appeared in The Edge Financial Daily, January 17, 2011.
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