PETALING JAYA: Benalec Holdings Bhd could see a possible 30% upside after an AMResearch analyst rated the stock a “buy” with an unchanged fair value of RM1.31 per share or a 45% discount to its sum-of-parts (SOP) value.
This follows the company’s announcement that it had extended the deadline for a binding term sheet with 1MY Strategic Oil Terminal Sdn Bhd and The State Secretary Johor Inc for a further six months to June 11, 2014.
Under the deal, 1MY Strategic Oil Terminal is to develop 404.6ha of land as a strategic petroleum storage facility at Tanjung Piai.
Analyst Hoy Ken Mak wrote in a report that Benalec’s role was to sell and subsequently reclaim the land for about RM2bil, based on its estimates.
The extension is the second one to the deal for all parties to be able to finalise the terms of a sales and purchase agreement but this did not come as a surprise to Hoy.
“We had highlighted previously that negotiations are expected to be protracted, given the project’s sheer size (reportedly worth about RM21bil based on local press reports) and complexity.
“However, Tanjung Piai investment merit remains largely intact given its close proximity to Jurong’s vibrant petrochemical hub in Singapore, where a large number of oil and gas multinationals are already operating,” he added in his report.
The report also noted that the company’s management was working beyond the 1MY deal to possibly secure more investors for Tanjung Piai’s development.
Despite this, however, Benalec had recently reported a first quarterly (ended Sept 30) net loss of RM4.66mil compared with a net profit of RM22.8mil a year ago in the same quarter.
First quarterly revenue dropped year-on-year (y-o-y) as well to RM14.4mil from RM57.75mil.
This may explain the underperformance in its share price year-to-date.
Hoy also noted that despite the loss, the key re-rating catalyst for Benalec would lie in how fast it can monetise the value of its Tanjung Piai landbank.
He also estimate that Benalec still has about RM200mil worth of done land deals and are likely to be progressively recognised over the subsequent quarters.
The stock added one sen at its close yesterday to RM1.02 with volume of 3.07 million shares valued at some RM31mil.