Analyst : James Ratnam
Price : RM4.78
Target Price : RM6.85
Market Capitalisation : RM3,006.8m
Recommendation : BUY
KEY STOCK STATISTICS (RMm)
PER SHARE DATA
P&L ANALYSIS (RM mil)
Selling Two Estates to Boustead REIT
Boustead Holdings Bhd (BHB) announced yesterday that it is disposing two estates, the Malakoff Estate and Bebar Estate to its subsidiary, Boustead REIT at a total sale consideration of RM192.4mn. Concurrently, BHB will enter into a leaseback agreement with Boustead REIT to lease the assets back to BHB for a yet to be determined lease payment. The two estates collectively own approximately 3,740 ha of land bank in Penang and Pahang. The total market value of both estates is RM194.2mn, a negligible 0.9% premium to the sale price.
First of Call Options with Golden Crop
These two estates are originally part of the 36k ha of land bank disposed to a SPV, Golden Crop Returns Bhd (SCRB) with a leaseback arrangement, to facilitate the issuance of RM742mn Islamic bonds and loans by the latter. BHB has the call options to buy back these estates at a pre-determined date, the first which due in Jan 2008. Malakoff Estate and Bebar Estate are the first part of a series of these call options.
Financial Impact on BHB
The disposal would result in a one-off gain of RM79.5mn to BHB in FY08. The sale consideration, although slightly lower than the market price would still value the land bank at a hefty RM51,447 per ha. Post-disposal, BHB's interest in Boustead REIT would increase to 57.04% from 53.39% as at July 29. Assuming the cash proceeds form the transaction is utilised to repay debts, the group's gearing would fall to 1.39x from 1.43x (excluding the effect of privatisation of Boustead Properties) according to the data given in the announcement.
Maintain Buy
No change in earnings forecasts pending finalisation of the S&P and the leaseback agreement. We continue to recommend BHB as a Buy with a target price of RM6.85.
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