The Edge, 30 May 2011 - Dijaya upbeat on 1Q results

The Edge, 30 May 2011

KUALA LUMPUR: Property player Dijaya Corp Bhd is riding on its strong first quarter ended March 31 (1QFY11) results and RM3.5 billion worth of projects in the pipeline to fuel growth over the next two years.

In a filing with Bursa Malaysia last Friday, Dijaya said its 1QFY11 net profit increased almost five-fold year-on-year to RM18.14 million from RM464,000 a year ago.

Pre-tax profit tripled to RM19.98 million from RM6.6 million a year ago despite revenue sliding 1.19% to RM57.68 million in 1QFY11.

Earnings per share was 3.99 sen in 1QFY11 compared with 0.1 sen a year ago.

Dijaya said its improved performance in 1Q was largely driven by its new property developments which garnered a higher profit margin of 34.64% compared with 11.31% a year ago.

These projects are the luxury Tropicana Grande condominium, the final Block E of the Casa Tropicana condominium and Pool Villas at Tropicana Indah Resort Homes.

Apart from that, Dijaya said its 1QFY11 also reflected a RM5.16 million net gain on fair value adjustment from marketable securities and recognition of RM4 million in compensation from a contractor.

Quarter-on-quarter, Dijaya's net profit halved to RM18.14 million from RM36.21 million while revenue fell 43.4% to RM57.68 million from RM101.91 million.

Dijaya noted that its 4QFY10 results had achieved contributions from completed projects such as the Tropicana Sungai Buloh commercial centre and the Tropics serviced apartments.

In its 4QFY10, Dijaya's results had also included a RM11.14 million net gain of fair value adjustment from marketable securities.

Dijaya managing director is upbeat that the group would continue to post improving financial results on the back of its strong 1QFY11 results and the good location of its ongoing developments.

Dijaya plans to launch a slew of projects totalling RM3.5 billion in gross development value (GDV) over the next two years to drive growth for the property player, Dijaya MD said in a press statement.

In the pipeline are planned serviced apartments in Tropicana Danga Bay in Iskandar Malaysia, the Tropicana Gardens commercial centre in Petaling Jaya and the Tropicana Bayou mixed development in Balakong, Selangor.

Dijaya recently announced its first foray into the hospitality business by teaming up with US-based Starwood Hotels & Resorts Worldwide Inc to develop a W Hotel in Jalan Ampang, near the iconic KLCC Petronas Twin Towers.

"With all these projects in the pipeline, Dijaya is poised for growth," Dijaya MD added.

Having established its brand with the flagship Tropicana Golf and Country Resort and Tropicana Indah developments, Dijaya has turned to developing its landbank in other parts of the Klang Valley and the Iskandar Malaysia region down south.

The group has developed all but 20 acres (8 ha) of its 625-acre landbank in the Tropicana Golf and Country Resort in Petaling Jaya but still has about 50 acres in the adjoining Tropicana Indah Resort Homes. It is set to launch freehold townships in Cheras and

Balakong/Kajang this year, with a combined GDV of over RM500 million.

Its new projects would provide a strong catalyst for the group's future growth and investors can look forward to good margins after having acquired landbank in Kajang and Cheras at low prices, said a property analyst.

He said the new landbank, with about 66 acres in Kajang and 28 acres in Cheras, was acquired from RM16 to RM17 psf in late 2007 and early 2008 and is strategically located within or near established areas. The agricultural land was cheaply bought which was later

converted into residential status, said the analyst.

The signing of an agreement in early April between Dijaya and Starwood also paved the way for the development of Dijaya's 55,929-sq ft plot of land on Jalan Ampang, Kuala Lumpur.

Dijaya had acquired the land for RM123 million in late 2009, or about RM2,200 psf, which some observers said was a high price at that time. Sunrise Bhd had paid RM2,588 psf for Wisma Angkasa Raya next door, with a direct frontage to KLCC's Petronas Twin Towers, while

Magna Prima acquired the Lai Meng school opposite for about RM1,500 psf in a land-swap deal.

Nonetheless, subsequent transactions around the KLCC area, notably those near Jalan Kia Peng, have been at above RM2,000 psf.

Analysts said Dijaya's stock appeared to be deeply undervalued, currently trading at a trailing price-to-earnings ratio of 8.5 times and 43% below its net assets per share of RM2.02 as at March 31.

Last Friday, it gained one sen to close at RM1.16 with a thin volume of 74,900 shares.

The company has net cash and equivalents of RM36 million as at March 31, with a large landbank as well as investment properties that include The Tropicana City Mall in Petaling Jaya.

The analyst noted that the prime land which houses the Tropicana Golf and Country Resort and Damansara Indah Resort Homes was reflected at very low prices in Dijaya's books.

According to its 2009 annual report, it has 259.56 acres in Tropicana Golf and Country Resort, including a golf course, valued at RM118.27 million or RM10.46 psf.

However, it is believed that the area left for development is around 20 acres.

In Tropicana Indah Resort Homes, Dijaya has 50.78 acres with a book value of RM11.24 million or just RM5.08 psf.

A check with property listings shows that the bungalow land in Tropicana Golf and Country Resort has asking prices of around RM320-RM380 psf, while in Tropicana Indah, it is going for RM280-RM300 psf.

The property analyst estimates that if the total 70-acre Tropicana landbank is valued at RM200 psf, it could be worth RM609.8 million, compared with an estimated book cost of about RM20.3 million.

With 455 million shares issued, the analyst estimates that the potential revaluation gains of RM589.5 million are worth RM1.30 per share on top of Dijaya's current book value of RM2.02.