BCB Berhad (Building Communities & Beyond)

BCB Berhad (Building Communities & Beyond)

Formerly known as Kemajuan Buditama Sdn Bhd, listed on Bursa Malaysia as BCB Berhad in December 1996. BCB is the largest property developer in Batu-Pahat & Kluang towns (Second and Third largest town in Johor state). Completed over 14,000 of various properties worth RM1.5 Billion GDV, BCB Berhad projects are spread over several towns namely, Kluang, Batu-Pahat, Parit-Raja, Pontian, Yong-Peng, Johor-Bahru, Senawang & Klang Valley. 

Key Ratio and Statistics

·         Total Asset RM600 million, Total Liabilities RM180 million, Total Equities RM420 million

·         Cash Per-Share RM0.32

·         Net Gearing 67%, highly geared like other properties company. Gearing mainly from Kota Kemuning land which is purchased for residential development. Loan repayment has been made progressively to reduce total gearing (cash flow statement)

·         Book Value Per-share RM2.04, Price to book value 0.58 times, which is very low (based on current price 1.20)

·         Reserves which is qualified for 1 for 1 bonus issue

·         Price to earning 6.4 times (based on current price 1.20)

·         Debt to Equity ratio 0.43x

·         Return on Equity 9.3x

BCB Berhad List of Properties

BCB Berhad on-going project

·         Concerto North Kiara (Klang Valley)

High-end condominium project located on a 5 acre land in vicinity of Mont’ Kiara, Kuala Lumpur (offering private lift lobbies). Total GDV RM560 million, to-date RM340 million sold

·         Home Tree (Klang Valley)

High-end mixed development located on 151 acres of land in Kota Kemuning, Shah Alam, Selangor (comprising mainly 3 storey bungalows and shop-lots). Phase 1 fully sold, Phase 2 to be launched in December 2014. Total GDV RM1.8 billion, to-date RM280 million sold.

·         Bandar Putera Indah Topaz, Ruby, Citrine, Crystal (Batu-Pahat, Johor)

Mixed development located on 390 acres land in Batu-Pahat (comprising mainly single and double story terrace house). Total GDV RM1.1 billion, to date RM100 million sold.

·         Elysia Park Residence (Medini Iskandar, Johor)

High-end 6 tower blocks located on a 7.81 acre of land in Medini, Iskandar Malaysia, located right in front of Gleneagles Hospital (walking distance to Legoland and view of Singapore). Total GDV RM1.2 billion (to be launched on 2^nd half of 2015)

Year to date, BCB launched a total estimated GDV of RM4.66 Billion worth of projects, which will provide a sustainable earnings over few financial years.

BCB, Unfair MGO Price

Owner Datuk Tan Seng Leong, through their subsidiary, Evergreen Ratio Sdn Bhd acquired 22.55 million shares in BCB Berhad representing 11.26% of the issued and paid up capital, which total brought up a sum of its existing shareholdings to 44.08%, triggering a mandatory general offer MGO for the remaining shares in BCB berhad. Takeover price (RM1 or 0.49 times price to book value) doesn’t seem to attract any takers due to several reasons. Firstly there are many freehold land banks that are yet to be revalued (Refer to list of properties and the date of revaluation). We estimate a net book value of RM2.50-RM3.00/share upon revaluation of its land banks and property assets. Hence, we concur with KAF’s independent advisory opinion that the takeover price is “unfair” and “unreasonable”. The privatization would likely not go through. In any case, the circular to shareholders has stated that the owners intend to maintain the listing of the company.

BCB, riding the wind of High Speed Rail

As planned earlier in the Economic Transformation Program (ETP), Southern Corridor High Speed Rail (HSR) announcement will took place in the 2^nd half of 2015. HSR, which will officially connect Kuala Lumpur with Singapore, is expected to commence in the early 2016 and target to be operational by 2020.

Note that, the initial path of HSR connects Kuala Lumpur, KLIA, Seremban, Melaka, Muar, Batu-Pahat, Johor-Bahru and finally Singapore. BCB Berhad, is among the largest developer in Batu-Pahat and owns a lot of freehold land banks that are yet to be revalued (Refer to the list of properties above). News flow on the soon-to-be announced HSR would be welcomed and should generate significant interest on the stock. We believe that upon completion in 2020, value of their Batu-Pahat land banks could potentially double or triple in value.

How much is this company’s share worth?

Having gone through the company’s background and development projects, we now come to the most important question… what is BCB worth?

BCB is currently trading at a historical PE of 6.4 times. Comparing this to valuations of other smaller property development companies listed on Bursa (see below), the stock appears cheap.

Our conclusion, BCB Berhad is a worthy investment consideration and an undervalued company yet to be discovered.

Note: BCB Berhad is also one of the fastest growing company featured in Focus Malaysia this week

Target Price

Worse Case --- RM1.73

Base Case --- RM1.94

Best Case --- RM2.16