Sunday 2 August 2015

Ken Holdings (2)

KEN TTDI to Boast Earnings by 36%

Publish date: Wed, 16 Apr 2014, 09:22 AM 


I did not expect myself to write Part 2 of the article so soon.
But according to today's newspaper, the MD of Ken told shareholders in yesterday's AGM that upon completion by early 2015, KEN TTDI (a 13 storey office building with 214,000 sq ft of office space and 42,800 sq ft of F&B outlets to let) will contribute RM15 million recurrent income per annum.
(Working backwards, monthly rental rate is approximately RM5 per sq ft)

Based on assumption that the RM15 mil is gross rental income and assume 70% profit margin, net rental income is approximately RM10 mil. After 25% tax, net profit contribution will be RM7.5 mil.
(just to cross check : the company states that cost of investment for KEN TTDI is RM120 mil. Based on RM7.5 mil net profit, net yield is approximately 6.3%, which is consistent with industry average and market expectation)





On pro forma basis, group earnings will grow from RM21 mil to RM28.5 mil, representing an increase of 36%.
Prospective PER based on existing market cap of RM210 mil would be 7.4 times. (Historical PER would be 10 times)


Concluding Remarks

I initiated coverage on Ken few days ago because I feel that a small cap property company with small earnings base will have good potential to grow as long as the owner and management is reasonably competent.
The latest news about KEN TTDI kind of reinforce my belief that the above mentioned concept is correct.


Having said so, I feel that Ken's prospective PER of 7.4 times has more or less factored in the good news (note : historical PER is 10 times).
It is not really undervalued now.
But no harm keeping it in your watch list and add some when there is opportunity.

Have a nice day


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