Upside potential for Selangor Dredging
Posted on | April 6, 2007
PETALING JAYA: Property developer Selangor Dredging Bhd saw its shares jump 13 sen, or 17.81%, to close at 86 sen yesterday. Volume for the counter yesterday was also healthy at 4 million shares. Incidentally, Kenanga Research initiated coverage on the stock yesterday with a “buy” call. “Selangor Dredging has successfully transformed from a tin mining concern into a property development and investment company under the helm of managing director Teh Lip Kim,” said the research house. Kenanga likes the company for its success in creating developments that are unique and have appealed to its target market of high-end buyers. “It differentiated itself by doing a significant amount of homework before launching its first project, Amansari in Puchong, in 2003. “The result was a success, where a leasehold project was sold at a premium in a largely freehold area, as it offered more,” the report added. Projects in the pipeline were also set to propel the company’s earnings for the next five years, Kenanga said. “These are to be launched and developed over the next three to five years with gross development value of more than RM700mil,” it said.
The company is also expected to benefit from the current property market that is conducive for high-end residential projects. TA Securities construction stocks analyst Kamarulzaman Hassan agreed, saying that, with the recent relaxation of foreign ownership rules and abolishment of real property gains tax, high-end developers were expected to do well. “We have also seen the value of high-end properties, such as detached and semi-detached units, rising at a compounding rate of 8% over the past four years compared with 4% for medium and lower-end units,” he added. The higher appreciation rate should result in greater demand from buyers for high-end properties, he said. On the flipside, Selangor Dredging had a small land bank (130 acres) which raised concerns of continuity of its operations, Kenanga said. It added that this also meant lower land-holding costs.
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