Monday 16 June 2014-Petchem, MKLand

It is now (June 2014) conducting technical and financial feasibility studies on several projects under Petronas’s USD16 billion RAPID projects.

PetChem is expected to play a major role in the project, given its status as Petronas’ only petrochemical business unit. Nonetheless, it is understood that PetChem has yet to conduct detailed studies on the prospects and management may only make its final investment decision by end 2014 or 2015.

In addition, Petchem’s future earnings growth may be driven by the USD1.5 billion Sabah ammonia and urea project, and the USD500 million aroma Chemcial project in Kuantan, Pahang.

Notwithstanding the high future capex requirement, management has committed to maintaining its dividend payout policy of around 50% of net profit. PetChem had rm9.4 billion of net cash as at end March 2014. The strong cash position, strong operating cash flow of over rm4 billion per annum and substantial headroom to gear up should enable Petchem to maintain its 50% dividend payout, translating into a net dividend yield of 3% to 3.5% per annum.

Broadly industry observers are expecting its product prices to remain stable for the second half of 2014.

MKLAND

The group is still working on launching a few projects in Damansara Damai and Damansara Perdana with a combined GDV of more than rm1 billion. Unbilled sales remain at rm300 million.

 

It is understood that the land sales of its 9.6 acres land in Damansara Perdana in April 2013 will be recognized in the fourth quarter of the financial year 2014 ending June (FY2014).

New projects in the pipeline include two condominium projects in Damansara Damai and another two in Damansara Perdana.

Meanwhile near term earnings will be driven by selling the remaining semi detached units at Rafflesia.

MK Land is still looking to dispose of non strategic assets and the next asset to be sold is the Setiawangsa land valued at circa rm96 million. The sale is taking longer than expected because approvals for the land have lapsed and MK Land wants to sell the land outright without securing new approvals.

LAD from Armanee Terrace is still haunting MK Land despite earlier guidance that the issues have been resolved with the engagement of a new contractor. The project is now (June 2014) in the seventh year and the LAD booked already more than rm100 million. The management is hopeful that the structural works will be completed by end 2014 and the architectural works should then move fast and target to handover by 2015.

All told, the additional rm20 million LAD is expected that will be recognized in the next few quarters.

Its realizable bet asset value estimated at rm1.67 after updating the balance sheet items and its land disposals.