TASecurities - Sentoriasentoria.com.my/investor-relations/docs/analyst...TASecurities...
Transcript of TASecurities - Sentoriasentoria.com.my/investor-relations/docs/analyst...TASecurities...
TA SecuritiesA Member of the TA Group
I P O
Thursday, 09 Feb 2012
FBM KLCI: 1,553.18
Sector: Property
MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048
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Sentoria Group Berhad
Fair Value: RM 0.80 Competition Bites! Main Market Listing
THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Not rated
TA Research Team Coverage
+603-2072-1277 ext:1664
www.taonline.com.my
Background
Sentoria Group Berhad (Sentoria) is principally involved intwo complementary
core business divisions, namely property development and leisure and
hospitality. Its property development business division specialises in township
developments and resort city developments, while the leisure and hospitality
business division owns / leases, manages and operates the hotels / resorts and
theme park facilities and attractions.
IPO Statistic
Sentoria's IPO entails a public issue of 60mn new ordinary shares, and an offer
for sale of 40mn promoters' shares.
Public issue:
• 20mn for public balloting; at 85sen/share;
• 10mn for eligible directors, employees and business associates of the
group at the IPO price of 85sen/share;
• 30mn shares for private placement at a price of 87sen/share.
Offer for sale:
• 40mn for MITI investors, priced at 87sen/share.
Main Key Concerns
1. The sustainability of Bukit Gambang Resort City’s (BGRC)
attractiveness;
2. Established property developer in Pahang, but it is still relatively
small in Malaysia in terms of property sales; and
3. Unclear near-term earnings visibility.
Valuation
We benchmark Sentoria to small-cap property stocks listed on the main
market of Bursa Malaysia. We value Sentoria at 6.0x CY12 EPS and derive a fair
value of RM0.80. We believe the discount of 0.4x multiple to average small cap
PER is fair given 1) its smaller market capitalization of less than RM400mn; 2)
rising competition in the theme park industry; and 3) unclear earnings
visibility.
Earnings Summary (RM mn)
FYE Sep 30 2009 2010 2011* 2012F 2013F
Revenue 91.4 123.2 172.4 209.1 242.7
Gross Profit 25.4 38.6 61.3 75.3 87.4
EBITDA 21.4 27.8 46.6 63.0 74.4
Interest cost (0.4) (2.1) (2.4) (2.1) (2.8)
PBT 19.2 22.6 40.3 56.7 66.3
Tax (5.8) (3.3) 5.6 (5.7) (6.6)
Minority interests (0.0) (0.0) (0.0) (0.0) (0.1)
Net Profit 13.3 19.3 45.8 51.0 59.6
EPS# (sen) 3.3 4.8 11.5 12.8 14.9
PER (X) @ IPO price 25.5 17.7 7.4 6.7 5.7
DPS (sen) - - - 2.6 3.0
Dividend Yield (%) - - - 3.0 3.5
Source: TA Securities
Share Information
Listing Main Market
Enlarged Share Capital (mn) 400.00
Market Cap @ RM0.85 (RM mn) 340.00
Par Value (RM) 0.20
Issue price (RM) 0.85
Oversubscription rate N/A
Estimated free float (%) 25
Tentative listing date
Tentative Listing Dates
Event Tentative Date
Opening of the IPO
Closing of the IPO
Balloting of Applications 14-Feb-12
Allotment of Shares 15-Feb-12
Listing
Ratio & Analysis
NTA per share (post IPO) (sen) 39.0
Price to NTA (x) 2.2
Proforma ROE (%) 28.7
Proforma ROA (%) 28.3
Proforma Gearing (x) Net cash
Utilisation of Proceeds RM(mn) %
Repayment of bank borrowing 11.2 21.7
Purchase of property, plant and
equipment9.0 17.4
Working capital 27.7 53.7
Estimated listing expenses 3.7 7.2
TOTAL 51.6 100.0
23-Feb-12
23-Feb-12
31-Jan-12
10-Feb-12
09/02/12
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TA SecuritiesA Member of the TA Group
Background
Established in 1998, Sentoria is principally involved in two complementary
core businesses, namely property development and leisure and hospitality. Its
property development business division specialises in township development
and resort city development, while the leisure and hospitality business
division owns / leases, manages and operates the hotels / resorts and theme
park facilities and attractions(See Appendix A).
Figure 1: Corporate Structure
Source: Prospectus, TA Securities
IPO Statistic
Sentoria’s IPO entails a public issue of 60mn new ordinary shares, and an offer
for sale of 40mn promoters' shares – see Figure 2. Of the 60mn shares under
public issue: 1) 20mn are allocated for public balloting; 2) 10mn for eligible
directors, employees and business associates of the group at the IPO price of
85sen/share, and; 3) the balance of 30mn shares will be allocated for private
placement at a price of 87sen/share. The 40mn promoters' shares will be
allocated for bumiputera investors approved by the Ministry of International
Trade and Industry, and priced at 87sen/share.
Figure 2: IPO Structure
Source: Prospectus, TA Securities
Utilisation of proceeds
The estimated gross proceeds of RM51.6mn raised are expected to be utilized
for 1) working capital; 2) repayment of bank borrowing; 3) purchase of
property, plant and equipment.
09/02/12
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TA SecuritiesA Member of the TA Group
Table 1: Utilisation of proceeds
Description
Estimated timeframe for
utilisation upon Proposed
Listing
Amount
(RM'000)
% of Total
Gross
Proceeds
Repayment of bank
borrowingWithin 6 months 11,200 21.7
Purchase of property, plant
and equipmentWithin 12 months 9,000 17.4
Working capital Within 12 months 27,700 53.7
Estimated listing expenses Immediate 3,700 7.2
Total proceeds 51,600 100
Source: Prospectus, TA Securities
Main Key Concerns
1) The sustainability of BGRC’s attractiveness
According to the independent market research, the size of theme park industry
in Malaysia is estimated at RM300- 350mn revenue/year with approximately
7.4mn visitors (2010). With 521k visitors in Bukit Gambang Water Park
(BGWP) in FY10, BGWP is the 3rd most popular theme park in Malaysia, with
approximately 7.0% market share of the domestic theme park industry, after
Resorts World Genting (53.8%) and Sunway Lagoon (11.3%).
Not really a tourist hot spot.BGRC is located in Gambang, Pahang, which is
within the East Coast Economic Region (ECER). It is one of the largest
integrated resort cities catering for the residents from East Coast of Peninsular
Malaysia, as 70% of its visitors are local residents from that region. However,
we are less bullish on these due to 1) local residents will hardly pay a second
visit to the theme park within a year unless there are substantial new
attractions added to the theme park. As such, the growth prospect of visitor
arrivals could be limited; and 2) unlike Pulau Langkawi and Port Dickson,
Gambang is not a tourist hotspot and as such it will be less appealing for
foreigners who usually have higher spending power.
Not really a recognisable and in-demand brand. Table 2 shows the top 10
largest amusement parks in the Asia-Pacific region by annual attendance. Note
that 3 out of the top 10 amusement parks carry “Disney” brand name. This
suggests local residents and tourists will opt for “branded amusement park” in
choosing destinations for holidays. Furthermore, the top 3 largest amusement
park corporation by annual attendance are those theme park operators that
own a recognisable and in-demand brand – see Table 3. Although Sentoria is
now engaging in aggressive marketing campaigns to create brand awareness
via TV, Radio and newspaper advertisement, we do not think these marketing
activities could enhance the brand name in a short period of time.
Table 2: Amusement parks in Asia-Pacific by annual attendance (‘000)
Rank Amusement park Location 2008 2009 2010
1 Tokyo Disneyland Tokyo, Japan 14,293 13,646 14,452
2 Tokyo DisneySea Tokyo, Japan 12,496 12,004 12,663
3 Universal Studios Japan Osaka, Japan 8,300 8,000 8,160
4 Everland Yongin, Gyeonggi-Do, South Korea 6,800 6,169 6,884
5 Lotte World Seoul, South Korea 4,236 4,261 5,551
6 Hong Kong Disneyland Hong Kong, China 4,500 4,600 5,200
7 Ocean Park Hong Kong Hong Kong, China 5,030 4,800 5,100
8 Nagashima Spa Land Kuwana, Japan 3,734 4,700 4,465
9 Yokohama Hakkeijima Sea Paradise Yokohama, Japan 4,555 4,500 4,023
10 Happy Valley Shenzhen, China 3,180 2,800 3,050 Source: Themed Entertainment Association
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TA SecuritiesA Member of the TA Group
Table 3: Top 3 largest amusement park corporation (‘000)
Rank Amusement park corporations Country 2010 Major theme parks
1 Walt Disney Parks and Resorts United States 120,600 Disneyland
2 Merlin Entertainments Group United Kingdom 41,000 Alton Tower UK, Gardaland Italy, Legoland Parks
3 Universal Studios Recreation Group United States 26,300 Universal Studios
Source: Themed Entertainment Association
Rising competition in the amusement park industry.
Currently, there are 11 active theme parks in Malaysia. With Legoland
Malaysia scheduled to open by end-2012, the competition in the amusement
park industry is getting stiffer. Legoland Malaysia, the world’s sixth Legoland
and Asia’s first, aims to attract more than 1mn visitors for the first twelve
months of operation. Table 4compares some of the key features of BGRC and
Legoland. The expensive ticket price of Legoland could deter local residents,
the close proximity to Singapore and airports should be a draw factor for
tourists from overseas. In addition, Legoland could become a must visit
destination for tourists as well as local residents, given its unique theme park
offering.
Table 4: Comparisons
Bukit Gambang Water Park Legoland Iskandar
Total land size (acres) 45.8 76
1- Day Ticket price (Adult, RM) 21.9 140
Owner Sentoria Group Bhd Merlin Entertainments Group
Travel time from KL (hour) 2.5 3.0
Travel time from Singapore CBD (hour) 5.7 0.75
Travel time from closest airport (minutes) 27 20
Source: Company websites
2) Established property developer in Pahang, but it is still relatively
small in Malaysia in terms of property sales.
Affordable housing will remain as an important part of the group’s property
development business as the group believe affordable housing is less
susceptible to those cooling measured introduced by the policy makers.In
addition, as the government aims to create home ownership among first-time
buyers, we believe demand for affordable homes will remain resilient. As such,
we are positive on the group’s involvement in the affordable housing segment.
As one of the established developer in Kuantan, the group’s property sales
display resilience even during recent downturn. In the past 3 financial years,
the property division has been consistently generated more than RM80m
revenue/year to the group. Going forward, we expect its affordable housing
(township development) to generatestableearnings to the group.
According to NAPIC, Pahang launched 3,546 units of new residential units in
2010. In terms of property sales, a total of 2,080 units of newly launched
residential units in Pahang were sold in 2010. Sentoria’s new launches and
new unit sold of 907 units and 504 units, translating to a market share of
25.6% and 24.2% respectively. While we reckon that Sentoria is an established
developer in Pahang, its property development operation is relatively small if
we were to compare it with the Malaysian residential property market. Based
on total 47,698 new launches and 21,799 new unit sold in Malaysia during
2010, Sentoria only captures market share of 1.9% and 2.3% respectively.
09/02/12
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TA SecuritiesA Member of the TA Group
3) Unclear earnings visibility
The management expects the leisure and hospitality division to have an equal
contribution with property development division by 2020 when the entire 537
acres of land is fully developed. Premised on: 1) 500k visitors per theme park;
and 2) average spending per visitor of RM100 (vs. RM32/visitor currently), the
four theme parks are expected to generate recurring income of RM200mn by
2020. However, we are less convinced by the management’s projection due to
1) the ability to sustain 500k visitors per theme parks; and 2) the ability to
increase entrance fees and F&B charges for the theme parks.
Financial Highlight
The property development division contributed more than RM80mn
revenueover the past 3 financial years. In FY10, the group achieved a YoY net
profit growth of 44.2% on the back of 34.8% surged in revenue, due mainly to
the first full-year contribution from the leisure and hospitality division. For
FY10, property development and leisure and hospitality divisions contributed
69.1% and 30.9% respectively to the group’s total revenue.
Figure 3: Revenue breakdown by segment
Source: Prospectus, TA Securities
Sentoria’s 10MFY11 net profit of RM38.2mn has surpassed its previous
financial year net profit of RM19.3mn. The net profit waspartly boosted by its
low effective tax rate.Going forward, we expect the property development
division to serve as a major earnings contributor, generatingthe bread and
butter sales to the group.
Earnings Forecast
We expect earnings to grow 10-18% for FY12-13. Our earnings projections are
premised upon the following assumptions:
� New property sales of RM155mn for FY12 and RM130mn for FY13;
� Number of visitors to theme park increased by 1.5k per year for FY12
and FY13; average revenue per visitor to increase 10% YoY for FY12
and FY13;
� Earning contributions from Arabian Bay resorts and Night Safari are
expected to begin in 3QFY12 and 2QFY13;
� Resorts operation: 5% YoY growth in average room rate; occupancy
rates:31-32% for FY12 and FY13.
09/02/12
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TA SecuritiesA Member of the TA Group
Valuation
There are no direct listed local competitors that are comparable to Sentoria.
However, for valuation purposes, we benchmark Sentoria to small-cap
property stocks listed on the main market of Bursa Malaysia. At IPO price of
RM0.85, Sentoria is trading at 6.4x CY12 PER, which is at par with its peers–
see Table 5. We value Sentoria at 6.0x CY12 EPS and derive a fair value of
RM0.80.We believe the discount of 0.4x multiple to average small cap PER is
fair given 1) its smaller market capitalization of less than RM400mn; 2) rising
competition in theme park industry; and 3) unclear earnings visibility.
Table 5: Peer comparison
Price (RM) Market Cap (RM mn)
CY11 CY12 FY11 FY12
YNH* 1.87 766.1 12.0 7.5 3.7 4.6
KSL 1.59 621.0 6.2 5.4 3.1 3.1
Plenitude* 2.10 567.0 5.8 6.0 4.0 4.5
Glomac 0.85 514.6 6.8 5.3 5.4 5.9
UMLand* 1.56 471.2 10.1 7.6 4.3 4.8
Crescendo 1.66 304.1 4.6 4.3 6.6 8.4
Hunza* 1.55 301.4 5.8 9.1 5.8 5.2
Bolton* 0.92 283.6 18.0 8.4 2.0 2.4
Hua Yang 1.56 224.6 4.6 3.7 3.6 4.4
Ivory* 1.05 195.3 4.0 6.6 7.4 4.8
Average 7.8 6.4 4.6 4.8
Sentoria 0.85 340.0 7.2 6.4 - 3.0
* Based on CY12 concensus estimates
Dividend yield (%)PER (x)
Source: Bloomberg, TA Securities
Earnings Summary (RM mn)
FYE Sep 30 2009 2010 2011* 2012F 2013F
Revenue 91.4 123.2 172.4 209.1 242.7
Gross Profit 25.4 38.6 61.3 75.3 87.4
EBITDA 21.4 27.8 46.6 63.0 74.4
Interest cost (0.4) (2.1) (2.4) (2.1) (2.8)
PBT 19.2 22.6 40.3 56.7 66.3
Tax (5.8) (3.3) 5.6 (5.7) (6.6)
Minority interests (0.0) (0.0) (0.0) (0.0) (0.1)
Net Profit 13.3 19.3 45.8 51.0 59.6
EPS# (sen) 3.3 4.8 11.5 12.8 14.9
PER (X) @ IPO price 25.5 17.7 7.4 6.7 5.7
DPS (sen) - - - 2.6 3.0
Dividend Yield (%) - - - 3.0 3.5
Sales Growth (%) 7.7 34.8 39.9 21.3 16.1
EPS Growth (%) (6.0) 44.2 137.9 11.3 16.9
EBITDA Margin (%) 23.4 22.5 27.1 30.1 30.7
PBT Margin (%) 21.0 18.3 23.4 27.1 27.3
Net Margin (%) 14.6 15.6 26.6 24.4 24.6
Tax Rate (%) 30.1 14.6 (13.8) 10.0 10.0
* Annualised
# Based on enlarged share capital of 400mn shares Source: TA Securities
09/02/12
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TA SecuritiesA Member of the TA Group
Appendix A:
Business Overview
Leisure & Hospitality
Sentoria is the developer and operator of Bukit Gambang Resort City (BGRC) in
Kuantan, Pahang. Built on 547 acres of land, BGRC is one of the largest
integrated resort cities with theme park, MICE (Meetings, incentives,
conferences and exhibitions) facilities and accommodation in Malaysia. BGRC is
located 35km from Kuantan town and 218km from Kuala Lumpur and is easily
accessible from the East Coast Expressway – see Figure 5.
Figure 4: Aerial View of BGRC
Source: Prospectus, TA Securities
Figure 5: Route to BGRC
Source: Prospectus, TA Securities
Attractions in BGRC:
i) Bukit Gambang Water Park (BGWP): Opened in mid 2009, the 45.8-acre
BGWP is one of the most popular theme parks in Malaysia, attracting more than
520k visitors per year since 2010. Within 2 years of opening, BGWP is the 3rd
most popular theme park in Malaysia ranked by visitor arrivals.
ii) Active Academy: Served as a complementary attraction to BGWP, active
academy offers a wide range of outdoor teambuilding activities for corporate
and families. All the activities are conducted by certified facilitators.
iii) MICE facilities: It has ample MICE facilities to accommodate multiple
functions simultaneously. The facilities have accommodated more than 500
groups thus far, the largest being 16 different groups totaling 2,400 pax in one
day.
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TA SecuritiesA Member of the TA Group
iv) Accommodation rooms: 998-room carribean Bay Resort is able to house
more than 2k pax, supporting the theme park “play-and-stay” proposition.
The group is continuously invest in BGRC’s attractions, MICE facilities and
accommodation to attract more visitors, increase length of stay and enhance
revenue per visitors. Currently, the leisure and hospitality segment contribute
about 30.9% of the group total revenue. The group expect contribution from
this segment to have an equal contribution with property development division
by 2020, when the entire 537acres of land is fully developed. Figure 6 and 7
shows the master plan and pipeline developments in BGRC.
Figure 6: BGRC Master Plan
Source: BGRC website, TA Securities
Figure 7: Pipeline developments in BGRC
Source: Prospectus, TA Securities
Property Development
Since inception, the group has completed and delivered RM419.2mn worth of
affordable residences mainly in Kuantan – see Figure 8. The group has a
proven track record of delivering its properties ahead of schedule, whereby
90% of the properties completed ahead of schedule and 59% delivered 6
months ahead of schedule.
09/02/12
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TA SecuritiesA Member of the TA Group
Figure 8: Completed Projects
Source: Prospectus, TA Securities
Current and future development
Currently, Sentoria has 4 on-going projects with an estimated GDV of
RM212.4mn – see Figure 9. It has also lined up RM541.7mn worth of new
launches within and outside BGRC, as well as its first foray in Selangor
(SalakTinggi)– see Figure 10. Beyond 2015, the group still has RM938mn
worth of projects to elevate the group to the next level – see Figure 11.
Figure 9: On-going projects
Source: Prospectus, TA Securities
09/02/12
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TA SecuritiesA Member of the TA Group
Figure 10: Upcoming Projects
Source: Prospectus, TA Securities
Figure 11: Future Projects
Source: Prospectus, TA Securities
Figure 12: 10-year key milestones
Source: Prospectus, TA Securities
Disclaimer
The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may
have an interest in the securities and/or companies mentioned herein.
forTA SECURITIES HOLDINGS BERHAD(14948-M)
(A Participating Organisation of BursaMalaysia Securities Berhad)
KaladherGovindan – Head of Research