KUCHING: Diversified property developer focusing primarily on residential and commercial property development Plenitude Bhd (Plenitude) are proposing to acquire 27 parcels of freehold land in Batu Ferringhi, Penang totalling some 40.8 acres for RM45 million or RM25 per square feet (psf).

According to OSK Research Sdn Bhd (OSK Research), this upcoming project in Penang would not only expand the group’s presence on the island but also provide the catalyst for good future earnings growth, in addition to stable earnings contribution from its traditional township developments.

Assuming the price paid was fair and represented about between 10 per cent and 15 per cent of the budgeted gross development value (GDV), the projected value could be worth between RM300 million and RM450 million.

However, the research house noted that the management had yet to disclose the budgeted value for the upcoming project.

Notably, the development was slated for medium high-end, semi-detached houses and condominiums whose units are designed with generous living spaces such as patios and balconies.

The research firm pointed out that the target markets were buyers who were looking for their first and second homes respectively, resort home buyers, the expatriate community and Malaysia My Second Home (MM2H) applicants who were eyeing a resort-style environment.

Apart from the GDV, the estimated development costs, launch dates and other launching details were currently sketchy. As such, the research house was not including the upcoming project into its forecast and valuation at this juncture.

OSK Research continued to believe that a broad sector rebound starting from late 2010/early 2011 would soon stir up investment interest in fundamentally sound and still-undervalued property stocks.

Furthermore, it also believed that most middle to big capitalisation (big cap) stocks were somewhat fully priced in the anticipated rebound and value could now be found only in the smaller cap property stocks such as Plenitude which was trading at a significant discount even to the middle cap stocks.

The research firm added that as next year’s rebound materialised, the risk premium on smaller caps was likely to fall and the valuation gap narrowed.

Using the valuation of small and middle cap stocks as a benchmark, it valued the group at 0.71 times current calendar year (CY) price over net total assets, which gave the stock a CY 2010 target price of RM3.84 per share.

OSK Research highlighted the share price was well-supported by the group’s anticipated robust earnings growth, strong balance sheet with net cash value of RM1.82 per share and the fact that it was currently trading at a significant 41 per cent discount to its net asset value.

Source: http://www.theborneopost.com/?p=29562

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