HSL (BUY) - Samariang land bank coup

Stock Name: HSL
Company Name: HOCK SENG LEE BHD

Research House: HLG

Price Call: BUY

Target Price: 2.21

HSL (BUY)

Samariang land bank coup

Entered into a S&P Agreement with Projek Bandar Samariang for thepurchase of a 275.5 acre land in Kuching's northern township of Samariangfor a total cash consideration of RM25.5m, equivalent to ~RM2.10/sq ft. Thelatest acquisition will enlarge HSL's existing land bank to a total of 890acres.

We belief that it will do well due to the positive spill over effectfrom Samariang Aman. The latest land deal will ensure continuity in HSL'sproperty launches in Samariang area.

GDV is estimated to be worth ~RM700m and the development is expected tocommence in 2013 and will span over a development period of 6 to 8 years.

The acquisition price of ~RM2.10/sq ft looks attractive compared to themarket price of ~RM5/sq ft for the area. Overall, land cost-to-GDV ratio is~3.6%, hence increasing the development's feasibility and success rate as wellas profitability.

By assuming a 10% discount rate over 7-years and 25% net profit margin,Samariang Aman 3 will translate to 16 sen/share for HSL.

Forecasts remain unchanged, hence maintain TP of RM2.21 based on12x average FY12 and FY12 earnings.

Source: HLIB Research 7 March 2012