Dijaya Corp's RM1.3b Canal City site purchase 'favourable'

KUALA LUMPUR: Dijaya Corp Bhd's acquisition of the 1,172 acres of land in Canal City for RM1.3bil is “favourable” due to its "cheap" price tag and payment terms which bodes well for its balance sheet, UOB KayHian Malaysia Research says.

"Although Dijaya's surprise landbank acquisition runs against our earlier assessment the company was in an asset monetisation and degearing mode, its acquisition of 1,172 acres of land in Canal City from the state of Selangor for effectively RM1.3bil (RM25.41per square foot) is deemed cheap," it said.

It maintained a "buy" call on the stock with a target price of RM1.65 per share as the Canal City land project would only be launched in 2015.

It said the staggered payment over 12 years would have minimal impact on Dijaya's balance sheet.

The research house said the RM1.3bil price tag was manageable as Dijaya had close to RM214mil cash, which should further strengthen based on its unbilled sales of close to RM1bil.

"The deal also includes an interest of 5% per annum of up to RM252mil (subject to waiver) and a gross development value (GDV) sharing totalling a minimum amount of RM458.3mil (out of a projected GDV of RM8.6bil)," the research house said.

It pointed out the land was next to IJM Land Bhd's Bandar Rimbayu, a development which attracted significant demand with over 6,000 registrants with first phase fully sold.

"With connectivity to five major highways, namely KESAS, LKSA, ELITE, SKVE and WCE (once it is ready), we believe Dijaya's cheap entry provides a good margin buffer for their integrated self-contained township development," it added.

UOB KayHian Research said the developer's latest acquisition would level up its landbank size and GDV significantly from 800 acres to 2,000 acres and RM50bil to RM70bil respectively. It also said Dijaya's realisable net asset value (RNAV) per share would be lifted to RM3.15 per share from RM2.35 per share, factoring in a conservative RM40 psf to the Canal City land.

"Pegging a similar discount of 30%, our target price could be lifted to RM2.32," it added.

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