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Thursday, March 7, 2013

Dijaya to pare gearing via asset sales


PETALING JAYA: Dijaya Corp Bhd is planning to pare down its gearing from 0.9 times to 0.5 times through some strategic disposals, which would translate to a reduction of about RM1bil in debt.
According to a company official, some of the proposals to achieve the debt reduction target included selling existing inventories, working-in-progress stocks, non-core land parcels and investment properties.
When asked if some of the divestments were part of the private property assets injected to the company by major shareholder Tan Sri Danny Tan earlier on, the company official said it was still finalising the parcels of land and investment properties to be sold.
In a report, UOB KayHian Research said it was positive on this strategy as it could remove the market's concern over its stretched balance sheet. The research firm maintained a “buy” call on the company with a target price of RM1.65.
The research house noted that the developer could sell its existing inventories worth RM190mil, work-in-progress inventories worth RM319mil, non-core landbank in Klang Valley and southern region estimated to be worth RM300mil, non-core investment properties and buildings worth RM250mil, and investment securities worth RM10mil among others, which would amount to about RM1bil.
“Hence, we expect asset monetisation to accelerate this year, aided by brisk sales. We understand Dijaya has already sold RM219mil worth of non-strategic land banks, and we expect RM193mil in gross proceeds to be booked into 2013,” it added.
The firm had adjusted its 2013 to 2015 core earnings forecasts by 25% to 41% after imputing contributions from Penang World City, a 102-acre mixed development with a gross development value of RM10bil.
“Our core earnings (forecast) do not include land sales. Note that 2013 earnings could hit at least RM170mil if we include the announced land sales year-to-date,” it said.
A property analyst said the company would be in a more comfortable position to expand during the good times while a lower gearing could act as a buffer during the bad times by paring down its debt level.
“It seems like a good time to sell some assets now (if the company intends to do so) as the Malaysian real estate investment trust is currently doing well,” she said.
She commended the company's effort to lower its gearing as it would enable it to focus on strategic expansion.

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