BRDB to ride on upcycle

By THE STAR

PETALING JAYA: Bandar Raya Developments Bhd (BRDB) is expected to ride on the current Malaysian property upcycle, thanks to its upcoming strategic projects, OSK Investment Bank Bhd said.

The projects, with gross development value (GDV) of more than RM4bil, coupled with the revival of Capital Square in Kuala Lumpur, is anticipated to give BRDB strong prospective earnings growth till at least 2010.

The company’s current projects include The Troika at KLCC and One Menerung. The projects worth about RM318.8mil and RM444.3mil respectively had a combined unbilled sales of RM771mil as at Aug 3.

Analysts believe that BRDB’s earnings growth for the financial year ending Dec 31 (FY08) and FY09 would be further fuelled by other mid-to-high development projects in the Klang Valley with total GDV of RM1.9bil. They noted that the company’s projects were mostly sited in areas highly targeted by affluent locals and expatriates.

OSK said BRDB was expected to have more than RM1bil worth of investment property assets by 2010, potentially generating an annual rental income of over RM90mil.

Backed by reasonable yields, good prospects of capital value appreciation and a sufficiently large asset base, analysts believe there was a strong likelihood these investment properties might be repackaged as a real estate investment trust by 2010.

According to the report, BRDB is looking to turn around and divest in Mieco Chipboard Bhd, its 56.8%-owned subsidiary and the second largest chipboard company in the Asia-Pacific, to focus on its lucrative property development arm in one or two years.

An analyst at CLSA Asia Pacific Markets concurred that BRDB’s upcoming projects would have a positive impact on the company’s earnings in the next two years.

CLSA has said BRDB was in the final stages of concluding the sale of one of its office blocks in Capital Square to an international real estate fund. The brokerage pointed out that the deal, worth RM426mil, was projected to add an additional RM85mil to profits over the next three years, adding that BRDB would also restructure Mieco before selling it.

CLSA has a “buy” call on the counter. It said BRDB was trading at bargain basement valuation at FY08 price/earnings ratio of eight times, which may drop to four times in FY09.

The counter closed 20 sen higher at RM3.32 yesterday.

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