NEWSROOM
 
Menara YNH finally off

YNH Property Bhd
(Dec 16, RM1.56)
Maintain Hold at RM1.59, target price unchanged at RM1.72:
YNH was notified in writing by Kuwait Finance House (Malaysia) Bhd (KFH) that the latter will no longer be proceeding with the formalisation of the sale and purchase (S&P) agreement for the partial sale of Menara YNH to KFH for RM920 million.

This was in response to YNH’s request for the S&P agreement to be executed by both parties. As such, YNH will be  consulting its legal advisers on all of the options available, including but not limited to specific performance and/or seeking damages from KFH.

This news is not surprising to us and we believe that applies to the market as well. The partial sale of Menara YNH has been widely expected to fall through following a long and protracted ecmlibranegotiation since the letter of offer was signed on Jan 11, 2008.

The management of YNH had previously insisted that the deal is legally binding and in the event KFH fails to complete the sale, YNH will be able to sell the building to the next highest bidder and claim any shortfall in prices from KFH. It remains to be seen whether YNH will be able to do that.

Nevertheless, the positive thing from this turn of event is that the uncertainty of the sale of Menara YNH to KFH was finally drawn to a close.

Going forward, YNH will be at its own liberty to deal with the building, either to sell it to the next highest bidder or construct the building first in order to extract better valuation within two to three years from now.

We are not revising our earnings estimates as we have disregarded the contribution from the partial sale of the tower to KFH.

YNH is one of the most undervalued property stocks under coverage judging by its 50% discount to its revised net asset value of RM3.21.

However, we believe the valuation gap is unlikely to be narrowed anytime soon until earnings from its pipeline of projects are crystalised.

Within the next two to three years, YNH’s earnings visibility will depend largely on the company’s yet to be launched “Kiara 163” and “Fraser Residence Kuala Lumpur” mixed projects in Mont’Kiara, and along the Jalan Ampang-Jalan Sultan Ismail enclave respectively.

As such, we maintain our hold call until we see better earnings visibility. The target price for YNH shares is also unchanged at RM1.72 which is based on a price-to-earnings ratio of 10 times financial year 2010 earnings per share. This is in line with our valuation for mid-cap property stocks — ECM Libra Investment Research, Dec 16

<< back
 
 
 
Copyright 2021 ECM Libra Group Berhad (713570-K). All rights reserved | Term