TAHPS Group given 'neutral' call by PublicInvest

PETALING JAYA: PublicInvest Research has initiated coverage on Bandar Bukit Puchong master developer TAHPS Group Bhd with a “neutral” call, citing thin trading liquidity and lacklustre sales outlook in the near term as a dampener for share price appreciation but its deep value is an attractive proposition for very long-term investors.
The research firm expects TAHPS’s stock price to continue to trade at a steep discount of 70% to its revalued net asset valuation, with a target price of RM7.37. It said the discount to RNAV of RM20 a share is to its low profile and lack of investor publicity over the years.
The 110-year-old group, which also owns 2,349ha of oil palm plantations in Terengganu and Pahang, is the largest owner of undeveloped land in the Puchong township, with 610 acres in Bandar Bukit Puchong and Puchong Utama. Based on IOI Properties project development nearby, PublicInvest thinks the potential gross development value (GDV) from its existing land bank (net area: 400 acres) could fetch up to RM10 billion.
Property development brings in 95% of the group’s earnings. The group sits on a cash pile of RM84 million with zero borrowings. TAHPS does not have a dividend payout policy, but has made generous dividend payouts in the 2013 to 2015 financial years, giving out more than 50% of its profit as dividend – which translated into attractive dividend yields of 3%-5%.
In FY16, the dividend payout ratio was reduced to 37% however, as group earnings softened due to poorer property demand. Dividend yield was only 1.5%.
Despite being a small scale property developer, TAHPS’s gross profit margin ranges from 48%-74%, one of the highest in the industry thanks to its relatively low land holding cost of RM3-7 per sq ft.
On its upcoming launches, the group plans to roll out two projects, Link Villas and BP Newtown Phase 3. Link Villas, is a 2- and 3-storey villa project, consisting of 140 units with a total GDV of RM100m (about RM720k-900k per unit). Depending on market conditions and residential development in Bukit Puchong, management plans to roll out a commercial shoplot project known as BP Newtown Phase 3 with a built-up area starting from 5,243 sq ft.
Launching of the villa project is expected by year-end. To enhance the value of the entire Bukit Puchong area, management is currently revamping the master development plan of Bandar Bukit Puchong and is scheduled for unveiling by year-end.
Risks to the stock include; share trading liquidity, with only an estimated 21% free float in the market; timing of monetisation of the full value of its landbank and any delay in the rolling out of the new master plan for Bandar Bukit Puchong.