LBS: Strategic Land Disposal Unlocks Value, Improves Gearing
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.67 (+45.7%) |
| Last Traded | RM0.46 |
| Recommendation |
A mid-sized property developer has announced a significant strategic move, entering into a sale and purchase agreement for the disposal of two parcels of land in Bandar Johor Bahru for RM110 million. The transaction is viewed positively by analysts, who expect it to bolster the company’s financial position and enhance shareholder value.
Strategic Disposal Details
The parcels, approximately 8,267 square meters (2 acres) in size, are located at Jalan Dato’ Dalam in the heart of Johor Bahru City. These lands, acquired between 2013 and 2014, are currently undeveloped. The selling price of RM1,238 per square foot is considered a record high for the area, underscoring the strategic value of the prime commercial location. The area is also well-connected to key infrastructure, including the Custom, Immigration and Quarantine Complex (CIQ), and major highways such as Tebrau Highway and Tun Razak (TAR) highway.
Financial Impact and Outlook
This disposal aligns with the company’s ‘8×8 Strategy,’ which aims to optimize its landbank and monetize non-core assets to unlock shareholder value. The transaction is expected to realize a significant gain of approximately RM45 million, given a net book value of RM64 million for the disposed assets. Furthermore, the company’s gearing ratio is projected to improve from 0.46x to 0.43x, strengthening its balance sheet. While the deal’s completion is expected by the second half of 2026, analysts anticipate no immediate changes to earnings estimates.
The proceeds from the sale are intended for reallocation into projects within the Klang Valley, allowing the company to strategically enhance operational efficiencies. Importantly, the company still retains 3.5 acres of adjacent land, which, if valued at the same market rate of RM1,238 per square foot, could be worth an additional RM193 million, highlighting further embedded value.
The investment bank maintains an Outperform rating, reflecting a positive outlook on the company’s prospects. The target price remains unchanged at RM0.67.
