Benalec Holdings - To the fore in Johor BUY

Stock Name: BENALEC
Company Name: BENALEC HOLDINGS BERHAD

Research House: AMMB

Price Call: BUY

Target Price: 2.85

Maintain BUY on Benalec Holdings with an unchanged fair valueof RM2.85/share ' based on the sum-of-parts methodology. Benalec unveiled1HFY12 results which were largely in line with expectations ' accounting for 52%-53%of both consensus and our full-year estimates. 

Net profit jumped 18% YoY on:- (i) a RM33mil gain on land salesin Malacca that was booked in 2QFY12; and (ii) a significant 10.5ppt QoQ jumpin EBIT margin for its marine division (ex-land sales).    

Benalec's outstanding order book stands at approximately RM541mil(~2.7x FY11 construction revenue), providing earnings visibility for the nextfour years.

We continue to like Benalec for its exciting prospects as oneof the fast-emerging integrated marine engineering specialists in Malaysia andthe region. 

A key re-rating catalyst comes in the form of the group's excitingforay in Johor, where it had in November secured agreement-in-principledevelopment rights to 5,245 acres of prime seafront land in South Johor.

The group is working hard to obtain the necessary approvals,where its immediate focus will be on Tg.Piai ' located on the south west ofJohor and just 17km away from Singapore's vibrant petrochemical hub inJurong. 

To be sure, Benalec has also signed an MoU with Singapore-basedRotary engineering to co-develop an integrated petroleum storage facility on250 acres  of reclaimed land atTg.Piai. 

Poignantly, Benalec is set to gain from multiple new earningsstreams via marine-related works and associated recurring income from theownership of this proposed oil terminal. We have assumed land sales of ~300acres each for FY13F-14F. 

Valuations remain compelling at FY12F-14F PEs of 5x-9x againsta robust EPS CAGR of 22% and supported by decent yields of 4%-9% on a targetedpayout ratio of ~30%.

Near-term prospects would be driven by: (i) cyrstallisation ofa further agreement with the Johor government; (ii) conversion of a formal SPAwith Rotary; and (iii) Securing off-takers to its prime Johor landbank. 

In addition, the group is also actively bidding for more reclamationjobs beyond Malacca ' notably in Penang, Selangor and Singapore.  

Source: AmeSecurities 

Positive takeaways from Benalec's investor briefing

Stock Name: BENALEC
Company Name: BENALEC HOLDINGS BERHAD

Research House: AMMB

Price Call: BUY

Target Price: 2.85

Benalec Holdings Bhd
(Nov 14, RM1.40)
Maintain buy with fair value of RM2.85: Maintain 'buy' on Benalec Holdings with an unchanged sum-of-parts-derived fair value of RM2.85 per share. Benalec held an analysts' briefing last Friday to highlight its success in securing the rights to reclaim and own two large tracts of land in South Johor ' Tanjung Piai (3,485 acres) and Pengerang (1,760 acres).

We came away from the briefing feeling more encouraged about Benalec's future prospects. The response to the briefing was overwhelming with over 50 analysts and fund managers attending. To be sure, Business Times reported that the Johor project may fetch a combined gross development value (GDV) of RM20 billion over the next 10 to 15 years.

The immediate focus, however, will be on harnessing the development potential of its Tanjung Piai landbank. Specifically, Benalec is working hard to monetise 2,000 acres under Phases 1 & 2. This piece of land has deep development appeal as a future oil hub because of its natural deepwater characteristics and strategic location adjacent to the vibrant petrochemical hub in Jurong.

The Johor project is scheduled to kick off by end-2Q12, implying that contributions will filter through from FY13F onwards. Having received approval in principle from the Johor government, Benalec is intensifying efforts to market the land, particularly to the oil and gas (O&G) and petrochemical incumbents in Jurong, Singapore.

The management expressed its confidence in the viability of its other landbank in Pengerang, although development will likely track the progress of Petroliam Nasional Bhd's ambitious RM60 billion refinery and petrochemicals integrated development (Rapid) initiative. Financing risk for the project will be reduced by: (i) back-to-back execution of reclamation with off-takers; and (ii) potential structuring of upfront payments upon issuance land titles.

To be sure, net gearing is forecast to improve from 0.7 times in FY12F to 0.6 times and 0.3 times in FY13F and FY14F.

Our current forecast for Benalec is only anchored on the 2,000-acre Tanjung Piai Phases 1 & 2 with land sales of 300 acres each over the next two years. Yet, the earnings impact is already significant with FY13F net profit forecasts at RM169 million (+51%) and FY14F at RM216 million (+27%) on pre-tax margins of 28% to 30%.

Trading at fully diluted FY12F to FY14F price-earning ratios (PER) of only five and 10 times against robust earnings per share compound annual growth rate of 27%, Benalec is an attractive play on the repositioning of South Johor as an emerging O&G hub.

The stock is poised for a significant PER re-rating upon contract delivery, with a maiden off-taker possibly in the offing soon. ' AmResearch, Nov 14


This article appeared in The Edge Financial Daily, November 15, 2011.

Benalec landing down south with oil hub and marine park

Stock Name: BENALEC
Company Name: BENALEC HOLDINGS BERHAD

Research House: AMMB

Price Call: BUY

Target Price: 2.85

Benalec Holdings Bhd
(Nov 11, RM1.35)
Maintain buy with revised fair value RM2.85 from RM2.22: We maintain our 'buy' call on Benalec Holdings Bhd and raise our fair value from RM2.22 per share to RM2.85 per share ' based on our revised sum-of-parts value under our base case assumption for its new ventures in Johor.

Benalec has announced to Bursa Malaysia it has secured the rights to reclaim and own two large tracts of prime seafront land ' at Tanjung Piai (3,485 acres or 1,410.3ha) and Pengerang (1,760 acres) on the southern tip of Johor.

The group is leveraging its core competencies in marine construction to create strategically located land with a water depth of more than 15m for the oil and gas and maritime industries.

These transformational deals ' leveraging highly industrialised developments ' will be very significant over the next 10 to 15 years.

In the immediate term, Benalec's primary focus will be on the 2,000 acres under Phases 1 and 2 in Tanjung Piai. Its development potential as an oil and gas hub is high due to its strategic location within the busy Straits of Malacca and close proximity to Singapore.

Tanjung Piai is earmarked to complement the vibrant petrochemical hub on Jurong Island, which is already overcrowded. The key success factors are land arbitrage, deepwater depth (more than 20m deep), easy access for very large crude carriers (VLCC) and a large hinterland. In gauging the potential development value of'' Tanjung Piai, the latest land cost in Jurong Island is about S$116 (RM285) per sq ft.

But, the litmus test is in securing off-takers for the land. This will act as the primary catalyst for Benalec's share price, we believe. Construction on Phase 1 is scheduled to commence by end-2Q12, as we expect the group to secure a major off-taker that would act as a trailblazer sometime soon.

We are not unduly concerned about the funding for Phases 1 and 2 of Tanjung Piai (estimated at RM400 million through a mixture of new debt/equity) that will likely be partly used for the payment of land premiums. The reclamation would be executed in stages once Benalec has secured off-takers without stretching its cash flows.

We have raised FY13F/FY14F net profit forecasts by 21% to 23%, anchored on our base case assumptions of 2,000 acres in Tanjung Piai, pre-tax margins of 28% to 30% and a higher new order book target of RM0.9billion to RM1billion (+12% and +25%).

Benalec is a cheaper but early-stage play on the repositioning of south Johor as an emerging oil and gas hub. Valuations are compelling at FY12F/FY14F price-earnings ratio of only five times. ' AmResearch, Nov 11


This article appeared in The Edge Financial Daily, November 14, 2011.

AmResearch maintains Buy on Benalec, FV RM2.85

Stock Name: BENALEC
Company Name: BENALEC HOLDINGS BERHAD

Research House: AMMB

Price Call: BUY

Target Price: 2.85

KUALA LUMPUR (Nov 11): AmResearch is maintaining its Buy call on Benalec Holdings and raised its fair value from RM2.22 a share to RM2.85 a share.

It said on Friday the higher fair value was based on its revised sum-of-parts value under its base case assumption for its new ventures in Johor.

On Thursday, Benalec has announced that it has secured the rights to reclaim and own two large tracts of prime seafront land ' at Tg.Piai (3,485 acres) and Pengerang (1,760 acres), on the southern tip of Johor.

'The group is leveraging on its core competencies in marine CONSTRUCTION [] to create strategically-located land with water depth of more than 15 metres for the oil & gas and maritime industries,' it said.

AmResearch said these transformational deals ' leveraging on highly-industrialised developments ' are indeed very significant over the next 10 to 15 years.

Benalec's FY11 results in line with estimates

Stock Name: BENALEC
Company Name: BENALEC HOLDINGS BERHAD

Research House: AMMB

Price Call: BUY

Target Price: 2.22

Benalec Holdings Bhd
(Aug 23, RM1.33)
Maintain buy at RM1.30 with revised fair value of RM2.22 (from RM1.90): We maintain our 'buy' call on Benalec Holdings Bhd with a higher sum-of-parts-derived fair value of RM2.22 (previously: RM1.90) after rolling forward our valuation base to FY12F.

Benalec reported FY11 net profit of RM96 million on the back of RM214 million in turnover. Excluding one-off items incurred for its listing expenses, Benalec's core net profit would have been RM91 million, and largely in line with our full-year estimates.

In 3QFY11, the group recorded some land sale gains in Melaka as well as the one-off adjustment in listing expenses.

Stripping these items off, core earnings would have been 15% higher quarter-on-quarter (q-o-q) at RM23 million. The pick-up in sequential earnings momentum came on the back of stronger billings from the Sentosa Cove project in Melaka, where construction is moving into full swing.

As a result, we estimate that core marine construction margins also rose from 39% in 3QFY11 to 41% in 4QFY11.

Benalec's outstanding order book remains healthy at about RM590 million, providing sufficient earnings visibility over the next five years.

Further out, Benalec remains bullish on the marine construction industry where there are over RM70 billion worth of job opportunities over the next 10 years.

The group has set its sights on four places ' Melaka, Penang, Johor and Port Klang, Selangor ' to spur future order book growth, especially in new areas such as marine parks and port/logistics facilities.

Beyond Melaka, Benalec is looking at a few reclamation proposals: (i) Penang airport (200ha); (ii) Penang Port (405ha) and E&O's Sri Tanjung Pinang 2 (280ha).

In Johor, Benalec is eyeing opportunities under Petroliam Nasional Bhd's refinery and petrochemical integrated development (Rapid) project in Pengerang as well as the Tanjung Bin oil terminal.

Abroad, the group will continue to bid for more marine-related construction jobs in Singapore, having secured a sizeable contract to supply and deliver construction materials in the island republic via its sister company back in 2008.

We continue to like Benalec for its deepening penetration as an integrated marine engineering specialist. Valuations are compelling at FY12F to FY14F price-earnings ratios of five to eight times against a robust three-year earnings per share compound annual growth rate of 22%. ' AmResearch, Aug 23


This article appeared in The Edge Financial Daily, August 24, 2011.

BENALEC - Benalec crystallising more value in Melaka

Stock Name: BENALEC
Company Name: BENALEC HOLDINGS BERHAD
Research House: AMMB

Benalec Holdings Bhd
(June 2, RM1.47)
Maintain buy at RM1.45 with fair value of RM1.90: We maintain a 'buy' on Benalec Holdings Bhd with an unchanged fair value of RM1.90 based on the sum-of-parts method. Benalec announced to Bursa Malaysia on Wednesday that the group has entered into an agreement with Vista Selesa Development Sdn Bhd for the proposed disposal of land in Klebang, Melaka.

The land measures 2,977,736 sq ft, with a 99-year leasehold period. It is strategically located within seven km west of Bandar Melaka and 15km southwest of Ayer Keroh town. In the future, it will also have direct access from the proposed Coastal Highway which links Duyong, Mahkota Parade, Kota Laksamana and Klebang.

Benalec will receive a total cash consideration of RM46 million for the first portion of the land measuring 1,627,405 sq ft (about 15ha).

For the remaining portion, Benalec has entered into a joint venture with Vista Selesa to develop 1,350,331 sq ft (12.5ha) of land into a mixed development project. Under the deal, Benalec would either receive a cash consideration of RM38 million or 25% of the project's estimated gross development value, whichever is higher, when it is completed in 2013.

Benalec also announced that it has proposed to undertake a private placement and a share buyback exercise of up to 10% each of its share capital.

Taken together with Benalec's net entitlement to the land sale on the first portion and estimated proceeds from any proposed private placement, based on the five-day volume-weighted average price at current values, we estimate that Benalec could potentially raise proceeds of about RM144 million.

We believe the latest move is part of Benalec's strategic positioning to raise capital ahead of more value-accretive deals in the future. To be sure, we gather that it intends to use part of any new monies raised to fund its upcoming Kota Laksamana project in Melaka.

We believe the 101ha Kota Laksamana land holds immediate development potential as it sits on prime seafront land within the Melaka city centre. We gather that Benalec is in the process of obtaining approvals from the authorities and the project could kick off by 4Q11. The group is also open to forging strategic partnerships with reputable developers to realise the deeply-embedded value of the land.

Based on land sales alone, we estimate that Benalec could reap a net gain of RM80 million or about RM27 million per year over a three-year period based on a conservative value of RM28 psf. ' AmResearch, June 2


This article appeared in The Edge Financial Daily, June 3, 2011.

BENALEC - AmResearch keeps 'buy' call on Benalec

Stock Name: BENALEC
Company Name: BENALEC HOLDINGS BERHAD
Research House: AMMB

AmResearch has reiterated the "buy" recommendation on Benalec Holdings Bhd with a fair value of RM1.90 per share, as the company is estimated to have clinched new contracts worth RM608 million for the financial year-to-date, compared to RM77 million in 2010.

The research house said it also estimates new orders of RM650 million for Benalec for the financial year ending June 30, 2011.

AmResearch said the newly secured RM37 million reclamation contract in Selangor would undoubtedly put Benalec on a stronger footing to clinch more such contracts, both at home as well in the region.

The contract is the second, the group has secured within this week, following the Kota Laksamana project in Melaka.-- BERNAMA

BENALEC - Benalec a small-cap construction outfit but fast growing

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.

BENALEC - OSK Research sees TP for Benalec at RM1.42

Stock Name: BENALEC
Company Name: BENALEC HOLDINGS BERHAD
Research House: OSK

KUALA LUMPUR: OSK Research said Benalec, which will make its debut on Monday, Jan 17, has target price of RM1.42, based on the sum-of-parts method, implying a strong 42% upside.

It said the company is involved in marine engineering in which it has an 18% market share. Its business model is unique in that it also accepts the reclaimed land as payment.

'Margins are above the CONSTRUCTION [] sector average. We see more reclamation jobs from Melaka, Penang and Johor. There is also potential to expand into land scarce Singapore. Our RM1.42 TP, based on the SOP method, implies a strong 42% upside,' it said.

BENALEC - Benalec soars on debut

Stock Name: BENALEC
Company Name: BENALEC HOLDINGS BERHAD
Research House: AMMB

KUALA LUMPUR: Shares of Benalec Holdings Bhd surged at the start of trade on Monday, Jan 17, making its debut at RM1.36, which was 36 sen above its offer price of RM1.

At 9am, there were 12 million shares of the integrated marine engineering specialist transacted.

The FBM KLCI rose 3.32 points to 1,573.21. Turnover was 38.71 million shares valued at RM33.40 million. Advancers led decliners 155 to 26 while 95 stocks were unchanged.

AmResearch has a Buy call and a sum of parts-derived fair value of RM1.90. The research house said Benalec enjoys an 18% share of the Malaysian marine CONSTRUCTION [] market dominated by only five major active players.

Meanwhile, OSK Research has target price of RM1.42, based on the sum-of-parts method, implying a strong 42% upside.

It said the company is involved in marine engineering in which it has an 18% market share. Its business model is unique in that it also accepts the reclaimed land as payment.

'Margins are above the construction sector average. We see more reclamation jobs from Melaka, Penang and Johor. There is also potential to expand into land scarce Singapore. Our RM1.42 TP, based on the SOP method, implies a strong 42% upside,' OSK Research said.