MK Land ended FY13 with a better than expected performance, after posting RM14.6m (+131.3 Y-o-Y, +9.5% Q-o-Q) and RM40.6m ytd (+67.7%) or 15.6% above our estimates Again, property development i.e. the Rafflesia semi-Ds and the One Damansara condominiums continued to drive its earnings. With the late charges from project delays behind them, EBIT margins improved better than expected to 23.5%, which is more than doubled Y-o-Y.

No new projects as yet. While earnings have improved, the Group is still slow in terms of new launches. Near-term, MK Land will continue selling the remaining inventories i.e. Rafflesia (Semi-Ds) and Metropolitan Sq (Condos) with a total GDV of more than c.RM500m. With the impeding completion of the remaining two huge projects (Empire Damansara was completed over early this year) by Empire Mammoth i.e. Empire City and Empire Residences, we believe MK Land will follow suit with new products soon..

Expects RM83.5m from land sale in FY1. To recap, MK Land just disposed a plot of land, measuring 9.59 acres for RM83.5m early this year which will be booked in next financial year. With the land sale proceeds, the Group will be comfortably sitting on net cash position soon. Further, we understand that the Group is still looking to dispose certain assets not identified for immediate development to streamline its assets such as the Setiawangsa land and certain plots in Damansara Perdana that estimated to worth >RM200m which in our view, should narrow the price-to-value gap when that materializes.

Maintain Outperform and PT of RM0.80 or c.50% discount of its RNAV estimate of RM1.56. With the balance sheet strengthened, we believe the Group is in a good shape to step up another gear to launch more projects, especially at their crown jewel, Damanasar Perdana to maximize returns from the prime landbank. As for dividends, we believe that it has the excess capital to reward the shareholders as they dispose more non-strategic assets.

Source: PublicInvest Research - 23 Aug 2013