AmWatch - IJM Land : Bandar Rimbayu forges ahead with Scarlet ACCEPT OFFER, 20 Oct 2014

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IJM Land : Bandar Rimbayu forges ahead with Scarlet     ACCEPT OFFER

We maintain BUY on IJM Land, pegged to the offer price of RM3.55/share under parent IJM Corp’s privatisation proposal. We visited IJM’s Bandar Rimbayu office recently to get an update of the project’s latest launch, Scarlet, and were impressed.

Scarlet comprises 110 units of linked homes under Phase 4 of Bandar Rimbayu (GDV: ~RM400mil). It is one of IJM Land’s major launches after the announcement of Budget 2015. Out of the 110 units, 45 non-bumi units were offered via balloting on 12 October. The response was impressive – 28 units or c.62% were pre-booked.

Starting prices for Scarlet are RM762k for the 24’x70’ variants, and RM820k for the larger 24’x75’ units. Compared with the starting prices for Phase 1 (Chimes: launched in March 2013), we estimate that the capital values are already higher by c.20%-30%. The good start for Scarlet affirms Bandar Rimbayu’s rapid emergence as a key township within South Klang Valley. Apart from Scarlet, all 24 units of the bumi lots released under Phase 2 (Perennia) earlier this month were snapped up. We expect the balance 60% of Phase 3 (Periwinkle: 32’x70’ cluster homes) to be well received, with a ~5% premium over its initial starting price of ~RM875k.         

As an alternative, investors seeking leverage to IJM Land can buy directly into IJM Corp. The elimination of IJM Land’s minority interest may lead to an upward re-pricing of PE under an enlarged IJM Corp (market cap:  ~ RM11bil) with improved trading liquidity. By extension, this may provide a 4% upside to IJM Corp’s fair value (RM8.30/share). More is to come, as we have yet to factor in potential contributions from:- (i) Kuantan Port expansion and the newly-acquired industrial land nearby; (ii) balance of works under West Coast Expressway (~RM2.2bil); and (iii) SILK highway.   

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