Friday, January 17, 2014

BREM - undervalued

It was reported that its tracts in KL and Klang should be worth five times more ... its net asset per share was worth RM8.32 versus RM2.79 currently, if a revaluation of its landbank was carried out.

Brem has since refuted the report. It said it wishes to advise that neither the directors nor the major shareholders had any communication with the writer of the said article.

The contents of the article, including the valuation of the group’s landbank and possible bonus shares issue, are purely the writer’s personal opinion, analysis and prediction which do not in any way represent the opinion of the company.

There is no bonus issue proposal as at the date of this announcement.

At rm1.92 the stock is trade at 0.69 times its latest unaudited net tangible asset (NTA) of rm2.79 per share as at Sept 30 2013.

Based on the list of properties it included in its annual report for the financial year ended March 30 2013, there may be an upside to its reported book value.

It could have not done revaluation exercises. The Mukim of Kapar land – its valued at only 4.3 sen psf and it was acquired in 1994. The 109.71 acr land in Kapar, Klang is only carried at rm204000.

The company also has multiple tracts in Mukim of Batu, KL, held under its 75% owned subsidiary. It is unclear whether the plots are contiguous with each other but one of the tracts, PT 25794 is said to be already under development.

More importantly, the average net book value of the eight plots of freehold land covering 34.368 acres in total and located in the Segambut area appear undervalued at rm73.55 psf. By comparison, IJM land and FCE Holdings bought the four parcels of land in Segambut at rm280 psf.

The tracts in Mukim of Batu alone could fetch another rm1.84 in net asset value for every Brem share.

However, very often a small cap developer should get a 30% to 40% discount to its RNAV.

Brem – a niche property developer behind the Bukit Prima Pelangit project in Segambut Dalam, which is adjacent to Mont Kiara township – is controlled by Datuk Khoo Chai Kaa.

Its current construction orderbook will last it for another four years is about rm260 million of which the gross development value exceeds rm650 million.

On May 31 2013, its 51% owed subsidiary, PNG Water managed to reinstate a concession terminated on March 31 2013. Brem expects the water supply and services sector to contribute consistent revenue and profit to the group.

The group’s net audited net debt position at rm117.88 million as at March 31 2013. Some rm142.88 million of land held for property development and rm111.9 million net carrying amount of a long term leasehold land and building of a subsidiary are also pledged to financial institutions for banking facilities.

Its 1HFY2014 net profit rose 82.23% year on year to rm18.81 million on the back of 76.3% year on year growth in revenue to rm92.23 million.

The company’s other business segments include civil engineering and construction (which contributed 10.24% to its 1HFY2014 revenue), property investment and investment holding (7.55%) and water supply and services (15.3%).

It is expected that there will be stable revenue and profit derived from the water supply and services sector. For the property investment and investment holding sector, the rental receivable in Kepong Brem Mall is expected to continue to contribute positively to the results of the group.

Some 71.34% of the company’s shares are held by its top 30 shareholders as at Aug 7 2013. Some 51.61% of its shares are in the hands of four shareholders, the largest of whom are Khoo and Lee with a combined 38.14% stake.

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.