BERJAYA Land has announced a conditional memorandum of agreement to develop a large-scale project in South Korea. The proposed development will be a mixed-use residential and commercial development called Yarae, a resort-type residential complex comprising up to 1,500 housing units, a 500-room hotel with a ballroom and a full-fledged casino, a commercial facility with shopping and dining functions, a medical facility and other private and public facilities on 74.4 ha in Jeju province.

Comment by ECM Libra Avenue Securities: This announcement comes hot on the heels of our coverage initiation report where we highlighted the company turning the corner domestically and investing big internationally, in Vietnam. While this project will not impact earnings in the near term, it will nonetheless contribute positively to the group in the medium term, along with its imminent contributions from projects in Vietnam.

The joint venture will be on a 81:19 basis with the Jeju Free International City Development Centre, and will cost about US$500mil. Land cost is estimated at US$79mil (RM266mil), translating to about RM33 or US$10 psf. The group may possibly reduce its equity stake to 51% upon completion of the proposed joint venture, or list it on the stock exchanges of South Korea or Hong Kong.

Jeju is a volcanic island south off the Korean peninsula and is a key link to continental countries like Russia and China and the oceanic countries like Japan and South East Asia. It is a great site for international recreation and tourism. The number of tourists to the island increased from 4 million in 2000 to 5 million last year. This is one of the main reasons for the company's investment in this project - to capitalise on the demand for local property and leisure assets.

Recommendation: We maintain our earnings forecast until further details are obtained, and re-iterate our BUY with an immediate target price of RM5.50.