Stock Name: KSL
Company Name: KSL HOLDINGS BHD
Research House: RHB
KSL Holdings Bhd
(May 9, RM1.74)
Maintain outperform at RM1.70 with fair value of RM2.40: Given a well-established foothold in the Johor property market as well as its new integrated commercial development ' KSL City located in the prime Johor Bahru city centre area ' KSL is a key beneficiary which can enjoy the robust development growth of Iskandar Malaysia and JB city centre almost immediately. Various efforts to boost the Iskandar corridor have been put in.
The key recent developments that we think are important and can benefit the JB city centre are the intra-city commuter train project, which will start operating by end-2012 and may eventually link up with the Singapore MRT at JB Central in 2018, as well as the opening of the coastal highway connecting JB city centre and Nusajaya (just 15 minutes drive) end-2011.
The commencement of the inner city commuter train and coastal highway will enhance the connectivity within Johor state. While population flow out of the city centre will be easier, people can also be brought in from other relatively remote areas in the state to the city centre, which is well-developed and primarily the business centre.
KSL City mall opened in December last year. We visited the mall recently, and were impressed with the concept, design and marketing of the project.
Currently, the mall is the only one that has an exhibition and convention centre facility, and competition from other malls is limited (only City Square) for now. Occupancy is now almost 100%, with 50,000 to 60,000 visitors on weekends.
Upon the opening of the anchor tenant Tesco in May, the management expects to pull in a greater crowd, with another wave coming after the opening of the service apartments and hotel early next year. D'Esplanade is now almost fully sold and seeking the release of bumiputera units.
The latest pricing was transacted at RM750 psf, 67% higher than the first launch price of RM450 psf at end-2009. Including the hotel, we expect recurring rental income to contribute about RM100 million per year. Assuming a decent rental growth rate of 8% per year, we estimate that the mall itself could be worth almost RM700 million.
Its Bandar Bestari Klang is also looking at higher pricing. As land values continued to rise, with the latest transaction price at RM36 psf (initial cost'' RM9 psf), KSL recently acquired another 6.7ha to have a better frontage for its project and management is planning to price its properties higher.
Note that we have only assumed RM23 psf for this piece of land in realisable net asset value and at RM30 psf, our RNAV will be boosted by 26 sen. Indicative pricing for its 32ft x 80ft clustered house is upped by another RM100,000 to almost RM600,000. The first phase is expected to be launched in July/August this year.
The risks include: (i) regulatory risk; (ii) delay in approvals and launches; (iii) competition from peers; and (iv) country risks.
Our forecasts remain unchanged and we reiterate our 'outperform' call. We believe the market has underestimated the potential of KSL's assets and landbank. The stock is currently trading at a deep 58% discount to RNAV. Based on 40% discount to RNAV, we maintain our fair value at RM2.40. ' RHB Research, May 9
This article appeared in The Edge Financial Daily, May 10, 2011.
Company Name: KSL HOLDINGS BHD
Research House: RHB
KSL Holdings Bhd
(May 9, RM1.74)
Maintain outperform at RM1.70 with fair value of RM2.40: Given a well-established foothold in the Johor property market as well as its new integrated commercial development ' KSL City located in the prime Johor Bahru city centre area ' KSL is a key beneficiary which can enjoy the robust development growth of Iskandar Malaysia and JB city centre almost immediately. Various efforts to boost the Iskandar corridor have been put in.
The key recent developments that we think are important and can benefit the JB city centre are the intra-city commuter train project, which will start operating by end-2012 and may eventually link up with the Singapore MRT at JB Central in 2018, as well as the opening of the coastal highway connecting JB city centre and Nusajaya (just 15 minutes drive) end-2011.
The commencement of the inner city commuter train and coastal highway will enhance the connectivity within Johor state. While population flow out of the city centre will be easier, people can also be brought in from other relatively remote areas in the state to the city centre, which is well-developed and primarily the business centre.
KSL City mall opened in December last year. We visited the mall recently, and were impressed with the concept, design and marketing of the project.
Currently, the mall is the only one that has an exhibition and convention centre facility, and competition from other malls is limited (only City Square) for now. Occupancy is now almost 100%, with 50,000 to 60,000 visitors on weekends.
Upon the opening of the anchor tenant Tesco in May, the management expects to pull in a greater crowd, with another wave coming after the opening of the service apartments and hotel early next year. D'Esplanade is now almost fully sold and seeking the release of bumiputera units.
The latest pricing was transacted at RM750 psf, 67% higher than the first launch price of RM450 psf at end-2009. Including the hotel, we expect recurring rental income to contribute about RM100 million per year. Assuming a decent rental growth rate of 8% per year, we estimate that the mall itself could be worth almost RM700 million.
Its Bandar Bestari Klang is also looking at higher pricing. As land values continued to rise, with the latest transaction price at RM36 psf (initial cost'' RM9 psf), KSL recently acquired another 6.7ha to have a better frontage for its project and management is planning to price its properties higher.
Note that we have only assumed RM23 psf for this piece of land in realisable net asset value and at RM30 psf, our RNAV will be boosted by 26 sen. Indicative pricing for its 32ft x 80ft clustered house is upped by another RM100,000 to almost RM600,000. The first phase is expected to be launched in July/August this year.
The risks include: (i) regulatory risk; (ii) delay in approvals and launches; (iii) competition from peers; and (iv) country risks.
Our forecasts remain unchanged and we reiterate our 'outperform' call. We believe the market has underestimated the potential of KSL's assets and landbank. The stock is currently trading at a deep 58% discount to RNAV. Based on 40% discount to RNAV, we maintain our fair value at RM2.40. ' RHB Research, May 9
This article appeared in The Edge Financial Daily, May 10, 2011.
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