Stock Information Market cap (RMm) Share Capital (m) OSK 188 Ticker IBHD

Transcription

1 29 January 2013 Stock Idea Shin Kao Jack Tel : +6(03) kaojack.shin@my.oskgroup.com NOT RATED Target Previous - Price RM2.24 RM1.39 i-city with High Growth Potential Major Shareholders (%) Sumurwang SB 58.9 Sumur Ventures 14.3 I-Bhd Stock Information Market cap (RMm) Share Capital (m) OSK 188 Ticker IBHD Industry Property Company Description The developer of the RM5bn GDV freehold i-city, a MSC Malaysia Cybercentre and Tourism Destination with residential and retail components, a shopping mall, cybercentre office suites, corporate towers and hotels. After seven years of development, i-city s freehold property development and leisure divisions are starting to show robust growth, as evidenced by a 592% growth in I-Bhd s 9MFY12 earnings. With further sales recognition expected from the RM232m GDV i-residence (70% sold, 10% pending signing of SPAs) and the RM64m GDV i-sovo (100% booked) launched last year, coupled with the impressive estimated 4m tourist arrivals to the theme parks in 2011 and 2012, its earnings are expected to grow further in the 4QFY12 and by another 128% in the FY13. The completion of the i-city Interchange (two ingresses and one egress) and a success in the potential joint venture with the Thailand s largest retail developer, Central Pattana PCL, to build an RM500m shopping mall should help increase property value and sales, improve tenancy rate and attract more tourists into i-city. The stock is still trading below its RM1.58 NTA/share as of 30 Sept Our price target is pegged to a 10x FY13 PER, translating into 1.4x P/NTA and 3.6% net dividend yield in FY13. Fast-growing earnings contribution from property development. Besides greater sales recognition expected from i-residence and i-sovo in FY13, i-bhd plans to launch RM300m GDV SOHO phase 1 in the 1QFY13 after Chinese New Year. I-Bhd will also be launching its maiden RM500m GDV freehold luxury condominium, Grand i-residence, in Jalan Changkat Kia Peng, Kuala Lumpur, sometime in the 3Q/4Q this year, should it obtain the final approval from the authority as scheduled. Competitive advantages of i-city. These includes (i) an increase in its plot ratio up from 1:3 to 1:5 lifted the gross development value (GDV) from RM3bn to RM5bn (ii) a 24-hour operation for approved outlets and activities to support night tourism (iii) a 21-year temporary occupation license for about 30 acres of neighboring land which can be used to create gardens and car parks (iv) a MSC Malaysia Cybercentre status development (v) i-city Interchange which is expected to be completed by year-end (vi) a potential JV to build a RM500m shopping mall (vii) located in a mature neighborhood, e.g. close proximity to primary and secondary schools, university, AEON, Klang Parade, etc. (viii) very near to New Klang Valley Expressway (NKVE), federal and Selat Klang highways, and (ix) a freehold land. Earnings from leisure division increasing fast too. I-City s theme parks have four precincts, namely: (i) City of Digital Lights with millions of LED lights (ii) SnoWalk with ice sculptures in a -5 Celsius environment (iii) WaterWorld (opened in Nov 2012) with ASEAN s first Tornado ride and cool splashing games (iv) FunWorld which features Trick Art Museum (opened in Nov 2012), i-kidz children playing zone (opened in July 2012), etc. As many main attractions in the theme parks only opened in the 2HFY12 and RM10m-15m capex to be spent in FY13, earnings from this division are likely to grow further this year. In FY13, I-Bhd plans to add two new attractions in WaterWorld, refresh the ice theme for SnoWalk, install new LED lights and create two new major attractions (> 10,000 sq ft floor space) for FunWorld. Supported by Tourism Malaysia, i-city, which has attracted millions of local tourists by hosting various major events including MTV World Stage Live and Miss Tourism International, may also see strong improvement in foreign tourist arrivals next year in conjunction with Visit Malaysia Year Attractive dividend expected. I-Bhd has been paying dividends for the last few years. As the company still has not paid any dividends for FY12, we expect it to declare 4 sen single-tier dividend in the 4QFY12 results, reflecting our expectation of the company posting the second-highest full-year earnings since current management took over the company in Considering its RM14.8m net cash and zero borrowings position as of 30 Sept 2012, we expect the company to achieve at least 30% net dividend payout ratio in FY13. That means whoever invests in I-Bhd now is expected to enjoy 12 sen single-tier dividends for the next 18 months, translating into an 8.5% net dividend yield at the current price. FYE Dec (RMm) FY09 FY10 FY11 FY12f FY13f Revenue Net Profit % chg y-o-y (94.1) (46.8) Consensus n.a n.a EPS (sen) Net DPS (sen) Net dividend yield (%) ROE (%) ROA (%) PER (x) BV/share (RM) P/BV (x) Malaysia Equity / OSK Retail Research / PP 17482/07/2013(032828) Page 1 of 9

2 Appendix I : Financial assumptions Figure 1 : Revenue and operating profit breakdown in RM(m) Property development Property investment Leisure ICT Service Others Total FY11 revenue FY11 operating profit Operating margin n.m. -13% 43% -110% n.m. 8% FY12 revenue FY12 operating profit Operating margin 22% -28% 40% -102% 1500% 25% FY13 revenue FY13 operating profit Operating margin 26% -43% 40% -150% n.m. 25% Source: Bursa, OSK Appendix II : Management & shareholdings Tan Sri Datuk Lim Kim Hong. Tan Sri Datuk Lim, the founder of I-Bhd, is currently the executive chairman of i-city. He directly and indirectly owns about 75% stake in I-Bhd through Sumurwang SB and Sumur Ventures SB. Sumur Ventures owns more than 90% stake in Sumurwang and Tan Sri Datuk Lim has more than 90% shareholding in Sumur Ventures. It is important to take note that Sumurwang is the land owner which owns all the land plots in i-city while I-Bhd is the developer and project owner of i-city. Although there could be risks in relation to unfavorable related party transactions, we deem the risk low as Tan Sri Datuk Lim also owns about 75% stake in I-Bhd. It would be in his best interest to optimize profits from both companies in order to gain from disposal and development of the land. In addition, independent directors of I-Bhd play an important role in protecting the interests of other shareholders. The shareholders of I-Bhd may actually benefit from this arrangement if I-Bhd achieves at least a 20% PBT margin at its property development division going forward, which is well above the levels achieved by some established public listed property developers. Besides, if the i-city land were to have been purchased under I-Bhd, the company could have incurred a high opportunity cost by holding on to the piece of land for at least 10 years. This is because Tan Sri Datuk Lim bought the land in 1994, when demand for properties in Klang Valley back then was still very much concentrated in between Subang Jaya and Kuala Lumpur, and the land did not break ground until seven years ago. Puan Sri Tey Siew Thuan. Puan Sri Tey, spouse of Tan Sri Datuk Lim, was appointed to the board in 1999 and is currently the executive director of I-Bhd. She is responsible for the property development and financial aspects of the company. Dato Eu Hong Chew. Dato Eu was also appointed to the board in 1999 and is currently the CEO of I-Bhd. He has a first class honors degree in mechanical engineering from the University of Glasgow, United Kingdom. He also holds an MBA from the University of Bradford, United Kingdom. Appendix III : Directors remuneration Executive Number of Directors Non-executive Total < RM50, RM50,001 - RM100, RM101,000 - RM150, RM151,000 - RM200, RM251,000 - RM300, RM301,000 - RM350, Source: I-Bhd Page 2 of 9

3 Appendix IV : Financials Figure 2 : Revenue trend Figure 3 : Earnings trend 16 RMm 3 RMm Figure 4 : Quarterly trend of property development Figure 5 : NTA / share trend 1 RMm 1.7 RM 8.0 Revenue Earnings QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY Figure 6 : Capex Figure 7 : Net dividend per share 35.0 RMm 9.0 sen Page 3 of 9

4 Appendix V : Theme parks top rides & attractions Figure 8 : Ferris Wheel Figure 9 : Space Walk Figure 10 : Circus Travel Figure 11 : Tornado Figure 12 : Play Pool Figure 13 : Trick Art Museum Source : OSK Page 4 of 9

5 Appendix VI : Property development Figure 14 : Scale model on the i-city Interchange Figure 15 : KL to Section 7 ingress in the works Federal highway Figure 16 : KL to i-city ingress in the works Figure 17 : KL to i-city ingress in the works Figure 18 : Groundwork on i-residence Figure 19 : Artist impression of the 33-storey i-residence Page 5 of 9

6 Figure 20 : Artist impression of i-sovo and hotel Figure 21 : Artist impression of i-soho Figure 22 : Overview of i-city Source: I-Bhd Page 6 of 9

7 Appendix VII : Theme parks Figure 23 : Overview of i-city s theme parks Source: I-Bhd Appendix VIII : i-city s nearby amenities Figure 24 : i-city is strategically located within minute drive to established townships, highways, schools, university and shopping malls UNIVERSITI INDUSTRI SELANGOR PASAR BESAR KLANG KLANG PARADE & GIANT SMJK KWANG HUA SEKOLAH SRI ACMAR KWANG HUA PRIVATE HIGH SCHOOL AEON UNIVERSITI TEKNOLOGI MARA BANDAR BARU KLANG I-CITY GIANT TAMAN ENG ANN TAMAN BERKELEY BAH KUT TEH STORES SKJ (C) TAMAN RASHNA Source: Google Map, OSK Page 7 of 9

8 OSK Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage Disclosure & Disclaimer All research is based on material compiled from data considered to be reliable at the time of writing, but OSK does not make any representation or warranty, express or implied, as to its accuracy, completeness or correctness. However, information and opinions expressed will be subject to change at short notice, and no part of this report is to be construed as an offer or solicitation of an offer to transact any securities or financial instruments whether referred to herein or otherwise. This report is general in nature and has been prepared for information purposes only. It is intended for circulation amongst OSK s and its affiliates clients. Any recommendation contained in this report does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This report is for the information of addressees only and is not to be taken in substitution for the exercise of judgment by addressees, who should obtain separate legal or financial advice. OSK, its affiliates and related companies, their directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this research report or any securities related thereto, and may from time to time add to, or dispose off, or may be materially interested in any such securities. Further, OSK, its affiliates and related companies do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or underwriting services for or relating to such company(ies), as well as solicit such investment, advisory or other services from any entity mentioned in this research report. OSK do not accept any liability, be it directly, indirectly or consequential losses, loss of profits or damages that may arise from any reliance based on this report or further communication given in relation to this report. The term OSK shall denote where applicable, the relevant entity distributing the report in the particular jurisdiction mentioned specifically herein below and shall refer to OSK Investment Bank Berhad, its affiliates, subsidiaries and related companies. All Rights Reserved. This report is for the use of intended recipients only and may not be reproduced, distributed or published for any purpose without prior consent of OSK. Malaysia This report is published and distributed in Malaysia by OSK Research Sdn Bhd ( V), 6th Floor, Plaza OSK, Jalan Ampang, Kuala Lumpur, a wholly owned subsidiary of OSK Investment Bank Berhad (OSKIB). This report is printed by Xpress Print (KL) Sdn. Bhd., No. 17, Jalan Lima, Off Jalan Chan Sow Lin, Kuala Lumpur. As of 29 January 2013, OSKIB does not have proprietary positions in the subject companies, except for: a) - As of 29 January 2013, none of the analysts who covered the stock in this report has an interest in the subject companies covered in this report, except for: a) - Singapore This report is published and distributed in Singapore by DMG & Partners Research Pte Ltd (Reg. No N), a wholly owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between OSK Investment Bank Berhad, Malaysia and Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited. As of 29 January 2013, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd, do not have proprietary positions in the subject companies, except for: a) - As of 29 January 2013, none of the analysts who covered the stock in this report has an interest in the subject companies covered in this report, except for: a) - Page 8 of 9

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