Monday, August 18, 2014

KSL ... Low Land Costs & Alternative To UEMSunrise !!!

KSL has shown a strong set of financial figures in the past three years as its projects in Johor Bahru and Klang took off.

Providing that significant boost to the numbers was also its rental income from its KSL City integrated development just 10 minutes away from the Johor Bahru Customs, Immigration and Quarantine Complex.

The group also has rental income from two properties leased to grocery chain, Giant in Muar and Nusa Bestari.

In its 2013 financial results, KSL recorded earnings of RM172.4mil, 35% higher than a year ago. Its revenue for the year was RM688.2mil. Of that, RM135mil was from rental while RM551mil came from property sales.

For 2014, its first quarter ended March 31 continued its upward momentum, recording RM61.03mil in net profits, 27.5% higher than the corresponding period a year back.

Revenue more than doubled to RM207.92mil.

Its second quarter results would be good as well, and the outlook for the second half of 2014 positive.

At the moment, KSL has several ongoing high-rise and landed property projects in Johor Bahru.

KSL has low land cost in addition to the reasonably good take-up rate. Looking at its segmentised earnings, KSL has an estimated profit after tax margin of 28% to 29% from its property development business.

To date (Aug 2014), the group has an unbilled sales of just over RM1bil.

KSL’s remaining GDV is estimated to be RM4bil to RM5bil.

KSL does not embark on aggressive landbanking.

KSL would appear to be a good alternative to UEM Sunrise Bhd, especially for investors who want exposure in the Johor property market but believe that the principal developer of Iskandar Malaysia is already overexposed among investors.

A source says that funds have been taking note of the undervalued counter; among those who were said to be interested were Permodalan Nasional Bhd, Pelaburan Mara Bhd and some insurance firms.

KSL has a market capitalisation of RM1.4bil and is trading on a current (15 Aug 2014) price-to-earnings of 7.54 times.

KSL has been able to beat the newcomers with its advantage as a Johor-grown property group. Another of KSL’s winning point is its low land cost from as far back as the early 2000s, before Johor was marketed as Iskandar Malaysia.

The cost for the group’s land bank accumulated in and around Johor Bahru over 10 years ago (2013-2014) were between RM3 to RM6.50 per sq ft.

Latest purchase of a small piece of land in Kangkar Tebrau was RM150 per sq ft. This was adjacent to KSL’s land which transacted at RM8 per sq ft 10 years ago (2014). Today (Aug 2014), land prices in coveted areas within the Iskandar Malaysia development blueprint could cost as high as RM1,000 per sq ft.

KSL’s products are targeted at a slightly different market, mostly of Johoreans and Singaporeans. Many of the latest developments in the Iskandar Malaysia region are priced beyond RM1mil.

Although Iskandar Malaysia has attracted a number of competitors, KSL has also benefitted from the attention on its homeground. For one, it has pushed Johor’s property market onto the portfolios of many foreign investors from Singapore as well as China, Hong Kong and Taiwan.

Foreign buyers make up nearly 20% of KSL’s total purchasers and the bulk of that comes from across the Causeway. Though most buy to invest, a fraction of KSL’s Singaporean customers are homebuyers who prefer to live in Johor Bahru and commuting to Singapore for work.

As at December 31, 2013, the group’s land bank spans 2,100 acres held for current and future development strategically located in Johor Bahru, Batu Pahat, Kluang, Segamat, Muar, Mersing, Klang and Kuala Lumpur.

The group is not actively looking to replenish land bank in areas it is not already in. Most of these properties will help sustain the group’s medium to long-term development and profitability. The properties are available for immediate development as they have been granted approval for sub-division.

For the rest of 2014, it aims to launch three new projects including the low-density serviced apartment, 18 Madge in Kuala Lumpur city centre, and continues with its repeat launches for ongoing projects

Going forward, the group plans to build more high-rise residentials as “the trend is that now, that is what the market wants”.

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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.