KENANGA RESEARCH: Hunza Properties - BUY - 28 Feb 2008

Second piece of land in the Klang Valley (KV).
Hunza Properties (Hunza) is acquiring 6.3ac land in Segambut for RM21.3m. The land is 5 minutes away from Mont Kiara, the most sought after location for premium lifestyle living inthe KV. The site is earmarked for 400 to 450 units of mid to high endcondominiums.

A Mont Kiara lifestyle for “half” the price, as Hunza intends to price itscondominiums at RM300psf to RM350psf, which is very attractive compared to Mont Kiara’s capital values range of RM550psf to RM850psf. Each unit’s build-up will be in the region of 1,000sf – 1,500sf, which works out as an affordableRM300,000 to RM525,000 per unit, especially for young working adultswanting a contemporary lifestyle. Based on these figures, we estimate GDV to be RM120m to RM184m. Timing of launch has not been revealed yet.

We think the land price is a bargain at RM78psf given its proximity to MontKiara/Sri Hartamas and new roads which makes Segambut more accessible.Also, by securing the land now, Hunza not only geographically increases itslandbank, but also purchased it for less than future market prices. We strongly believe that the increasing scarcity of land in Mont Kiara could propelSegambut’s land values higher.

Continuous presence in the KV is critical as KV home buyers areincreasingly brand conscientious and discerning. Hunza’s needs to havecontinuity in the KV to secure more earning diversification avenues, especially its comparatively smaller population size. The project further enhances itsbrand as a developer who can deliver quality wherever it goes.

Less ‘teething problems’ associated with starting a new team, as theexisting KV team is already in place. As this is their second KV project, Hunza KV team is familiar with the inner workings of KV which essentially expeditesexecution and save initial cost associated with setting up a new team. Target price based on sum of part RNAV remains unchanged at RM4.37, on a fully diluted basis, as we have conservatively valued the property usingthe purchase price. FY08E and FY09E PER valuations are very attractive at 5x and 4x versus the sector average of 15x and 10x, respectively. Maintain BUY.