BRDB - no deal for now till property valuation

Stock Name: BRDB
Company Name: BANDAR RAYA DEVELOPMENTS BHD

Research House: OSK

Price Call: TRADING BUY

Target Price: 2.93

Bandar Raya Developments Bhd (Sept 28, RM1.92)
Maintain buy at fair value of RM2.93 from RM3.14: On Monday, Bandar Raya Developments Bhd (BRDB) announced that it ceased all negotiations with Ambang Sejati SB (ASSB) in relation to the proposed disposal of BRDB's selected assets. Subsequently BRDB has opted to dispose of the selected assets by way of a tender and ASSB will be invited to participate in it.

On Sept 19, BRDB announced that it had proposed to dispose of selected investment assets namely Permas Jusco Mall, CapSquare Retail centre and its entire 100% equity interest in BR Property Holdings SB which owns the Bangsar Shopping Centre (BSC) and Menara BRDB to its major shareholder ASSB for a total consideration of around RM914 million. The announcement has resulted in negative reaction from various stakeholders expressing their concerns especially in regard to the transparency and fairness of the offer price.

Following the backlash, BRDB has decided to cease all negotiations with ASSB relating to the proposed disposal. After taking into account expressions of interest received from credible parties to acquire those assets, BRDB has opted to call for an open tender where ASSB will be invited to participate in the tender. To facilitate the potential disposal, BRDB will appoint an independent property valuer to manage the tender exercise with an announcement to be made at an appropriate time.

Given that we think the price offered by ASSB was unattractive, we view BRDB's decision to opt for the tender route positively as it would enable the group to garner better pricing for the assets via more competitive bids submitted from other interested parties. We reiterate our view that it is acceptable for BRDB to monetise its assets so long as they are disposed of at a fair and attractive pricing.

We maintain our 'trading buy' recommendation on BRDB but reverted to our previous valuation which was premised on its FY12 net tangible asset (NTA) before the disposal of the assets. Previously, we had valued BRDB based on 0.8x FY12 P/NTA post the disposal plus net cash dividend of 80 sen to arrive at our fair value (FV) of RM3.14.

As the timeframe for the tender exercise is yet to be determined, we now value BRDB at 0.8x FY12 P/NTA excluding the potential disposal. This gives rise to a new FV of RM2.93. ' OSK'' Research, Sept 28


This article appeared in The Edge Financial Daily, September 29, 2011.

AmResearch maintains Hold on BRDB

Stock Name: BRDB
Company Name: BANDAR RAYA DEVELOPMENTS BHD

Research House: AMMB

Price Call: HOLD

Target Price: 2.45

KUALA LUMPUR: AmResearch reaffirms its HOLD rating on BANDAR RAYA DEVELOPMENTS BHD []'' (BRDB) with its fair value unchanged at RM2.45 a share, pegging it to a 30% discount to its fully diluted net asset value (NAV) estimate of RM3.50 a share.

It said on Tuesday, Sept 20 that BRDB announced it had agreed to dispose of four assets ' (i) CapSquare Retail Centre (ii) Permas Jusco Mall (iii) Bangsar Shopping Centre (BSC) and (iv) Menara BRDB ' to Ambang Sehati, for a combined value of RM914 million.

The consideration value includes RM484 million net liabilities related to BSC and Menara BRDB to be assumed by the purchaser. This works out to RM1,000 psf for the four assets.

BRDB would require shareholders' approval and the deal should be completed by 1Q2012.

Following the proposed disposal, the group plans to distribute RM390 million from the assets sale to shareholders via a net cash dividend of 80 sen a'' share, comprising a two-tier gross dividend of RM0.88/share (net of tax 66 sen a'' share) and a single-tier dividend of 14 sen a share.

Apart from the dividends, the group plans to use RM302 million to settle its outstanding debt.

'Based our estimates, BRDB's gearing would be reduced to 0.4 times from 0.7 times as at end of December 2010,' it said.

AmResearch said while the proposed dividends are attractive for minority shareholders, we believe the cash proceeds are better off deployed for landbanking purposes or to fund its future developments, especially when its property development unit has been lacklustre due to delay in launches.

This is also true especially so in the current global economic climate.

'We would expect the group to be more aggressive in property launches now that jewel in the crown i.e. BSC would be disposed of. We estimated these four PROPERTIES [] would have contributed about 20%-25% to our EBIT projection for FY12F-FY13F with BSC making up the bulk of it,' it said.

BRDB up at mid-morning

Stock Name: BRDB
Company Name: BANDAR RAYA DEVELOPMENTS BHD

Research House: OSK

Price Call: BUY

Target Price: 3.06

KUALA LUMPUR: Shares of BANDAR RAYA DEVELOPMENTS BHD [] advanced on Monday, Sept 5 after The Edge weekly reported that the company was looking to pay a bumper dividend to its shareholders in a complex corporate exercise that could involve the disposal of Bangsar Shopping Centre (BSC).

At 10.17am, BRDB added three sen to RM2.36 with 236,400 shares traded.

OSK Research in a note Sept 5 said it was not was not entirely surprised with regard to the potential disposal of BSC given that management had previously indicated that it was weighing the possibility of unlocking the value of its investment PROPERTIES [].

The research house maintained its Buy rating on the stock with fair value of RM3.06 based on 0.9 times P/NTA.

'With several projects expected to be launched by the end of this year and the next, we expect BRDB's earnings outlook to turn rosier going forward,' it said.