Sunday, March 17, 2013

About KSL...

Its Prospects … dated Jan 2013

It is a natural beneficiary of the real estate boom in the southern state of Johor.

The Ku’s family owns over 50% of KSL, the fourth largest landbank owner in Iskandar Malaysia with 1500 acres.

The company had not revalued its property assets for 10 years and market observers see upside potential in its Nusa Bestari and Kempas Indah parcels. The book value of Nusa Bestari is rm58 million or about rm12 psf while that of Kempas Indah is rm74 million or rm18 psf.

These tracts are worth more in Jan 2013 and add significantly to KSL’s net asset value (NAV) given the company’s low historical cost for the assets.

KSL’s NAV amounts to rm956 million or rm2.47 per share.

The real game change for KSL are its Bestari and Kempas Indah projects both are strategically located near the second Link Highway and JB city centre.

Apart from property development, KSL also owns KSL city mall and KSL Resorts as well as Giant Muar and GiantNusa Bestari.

It is believed that KSL City Mall and KSL Resorts and the two hypermarkets are generating rm50 million to rm60 million in rental income a year. These properties are expected to contribute even more significant recurring income given that the retail mall and hotel business are in the early cycle or operations.

KSL is a potential REIT owners.

A revaluation of KSL’s assets will widen the discount gap to its NAV.

In the Klang Valley, KSL has more than 400 acres with the rest of its total landbank of some 2300 acres in Johor.

Based on the current (Jan 2013) share price, the Ku family will need to fork out more than rm300 million to take the company private. The privatization talk came over ayear after Tan Sri Syed Mokhtar’s privatization of UM Land and Tradewinds Corp Bhd which has landbank in Johor.

The chairman and largest shareholder of KSL, Ku Hwa Seng has denied talk about privatizing KSL.

Earlier there are rumors in the market that KSL could potentially be a privatization target.

There are several factors why a privatization is possible …

KSL has been undervalued.

Many property players are building up their landbank in Iskandar, either via direct acquisition or privatization of companies. These include tan Sri Syed Mohktar who has made privatization offers in 2012 to UM Land and TWS Corp which own substantial landbank in Johor. Given the trend, the Ku’s brothers may privatize the company given KSL owns two valuable property investment assets – KSL City Mall and KSL Resorts. These two assets and two hypermarkets are currently (Jan 2013) generating rental income per year and are likely to have more material contribution given that the retail and hotel are in the early cycle of operations.

If a privatization comes true, the Ku’s family will need to fork out about rm200 – rm250 million to fund the acquisition, which is manageable for the family given the assets in hand.

The offer price could potential be 1.85 – 1.90 per share.

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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.