Sarina looked at Intiland (DILD IJ). This is a property company with US$780mn market cap. The company has recently acquired 1,330ha land in Greater Jakarta, funded from rights issue proceeds Total land bank is now 2,400ha and balance sheet was revived.
We are cautious. Most of the acquired land is in relatively remote area. While DILD has 40 years of experience, the company has not been very active post Asian crisis era, due to its lengthy debt restructuring process. Not tested = execution risk. Valuation wise, it is trading at 30% discount to NAV. Not attractive compared to its peers.
Key points from the report:
Adding 1,330ha through Rights Issue. DILD raised Rp2tn from Rights Issue in Apr2010 and acquired 1,300ha land bank in West part of Greater Jakarta. The acquisition gives an enlarged land bank of 2,400ha. DILD plans to step up development of 690ha in next five years.
Balance sheet revived post Rights. The D/E ratio declined to 5% in June2010 from 31% in 2009. Profit in 1H10 increased to Rp223bn (1H09:Rp6bn) due mostly to divestment of non-core asset.
Nonetheless, DILD still runs negative retained earnings of Rp191bn as of 1H10.
Risks to execution. We think the risk lies on the fact that most of the acquired land is in relatively remote area, hence the company has to rely heavily on potential future infrastructure development, and build the township from scratch. The prospect of city property looks more promising. DILD also lacks experience being dormant for a long time.
Trading at 30% discount to NAV. The company now trades at 30% discount to its NAV based on latest appraisal by Colliers International, v.s. peers average at 55%.
The company had mentioned that the new investors which currently hold 38.1% stake will divest their stakes in the future.
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