Still 'Like' Despite Selldown - KSL (Assets Severely Undervalued) !!!

Its share price succumbed to selling pressure despite the Johor based property develop having achieved a record high profit for the financial year ended Dec 31 2014.

It posted a net profit of rm340 million or rm0.8056 per share in FY2014 an 87% increase compared with FY2013.

The selling was partly because of the group’s earnings have come in below market expectation due to slower billing recognition from property sales. Excluding a property revaluation gain of rm88.2 million, the group’s core profit would be rm252 million.

KSL has a massive landbank in Iskandar Malaysia that it acquired long before the boom. The group also enjoys stable recurring rental income from its shopping mall and hotel in JB.

Rental income grew to rm72.08 million in FY2014 from rm64.28 million a year ago. Its rental earnings are indeed higher than that of some of the listed real estate investments trusts.

In addition KSL has achieved an average profit margin of 34% thanks to low land costs.

Its low land costs provide greater flexibility in pricing, which helps KSL cater for the affordable market segment while maintaining decent margins. Furthermore, its growing property investment income helps provide earnings security should the broader property market remain soft.

KSL’s property’s assets are severely undervalued by rm1.55 billion. A revaluation of the group’s assets could yield an additional valuation of rm2.05 billion which would translate into a book value of rm3.90 per share.

KSL has started rewarding its shareholders with dividends.