Albeit small for now, Maybank Investment Bank (Maybank IB) believes KLK Land is poised to step up on its earnings contribution to the group in 3 years’ time as its upcoming retail mall at Bandar Seri Coalfield (BSC) will catalyst future launches and sales. A revival of the Kuala Lumpur-Singapore High Speed Rail (KL-SG HSR) may also catalyse its Johor property developments.
“Buy on KLK with an unchanged target price of RM23.90 on 17x FY23E price-earning ratio,” said Maybank IB in a recent report.
“We understand the mandate given by the Board to KLK Land is to unlock the value of the KLK’s existing landbank at the right time, and not chase after revenue growth at the expense of margin,” the research house added.
This implies that KLK Land is unlikely to acquire pockets of third party land for standalone developments for now. Still, KLK Land has enough on its plate.
Over the past 3 years, the property division averaged RM182m/RM59m in yearly revenue/ operating profits (from BSC alone), contributing to less than 5% of KLK’s group profits.
However, there are a few catalysts that can help propel KLK Land’s contribution in the medium term. To us, the proposed new mall, targeted to open by end-2025, will complete the amenities offered at BSC for a sustainable township, and catalyst future developments there as BSC forms part of the 6,600 acres land earmarked for property development in that area.
“There are recent talks of a potential revival of the KL-SG HSR. If it is revived based on the original alignment, KLK may be a beneficiary as one of the proposed stops is purportedly located next to its 500-acres Gerbang Nusajaya Development under Scope Energy SB,” said Maybank IB.
Besides this, KLK Land has another similar joint venture setup in Kulai, a 2,500-acres Fraser Development, zoned for industrial and mixed development that could be launched if interest in Johor property market picks up.
