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Tuesday, March 28, 2017

MAHB, DRB-Hicom, LBS Bina, Genting Plantations seen gaining from DFTZ — CIMB Research

By Sulhi Azman / theedgemarkets.com | March 28, 2017 : 11:36 AM MYT

KUALA LUMPUR (March 28): Malaysia Airports Holdings Bhd (MAHB) and DRB-Hicom Bhd are expected to be the key beneficiaries from the government's recently launched Digital Free Trade Zone (DFTZ), said CIMB Research.

"We see potential beneficiaries of DFTZ to include the logistic and e-commerce industry in Malaysia," CIMB Research analysts Ivy Ng Lee Fang and Michelle Chia said in a note to their clients today, adding that MAHB is seen as the key direct beneficiary.

"MAHB is a key beneficiary as it could earn additional income from the tenancy of the low-cost carrier terminal (LCCT) and the establishment of a regional e-commerce and logistics hub in KLIA Aeropolis," the analysts said.

"We see DRB-Hicom as an indirect beneficiary, via 53.5%-owned Pos Malaysia Bhd. According to the official announcement, Alibaba, Cainiao, Lazada and Pos Malaysia will roll out the initial phase of the e-fulfilment hub before end-2017," the research firm said. "We expect Pos Malaysia to play a key role as an e-fulfilment service provider through its logistics arm Pos Aviation Sdn Bhd."

CIMB Research added that the experience in much more mature markets suggests that the room to grow the electronic commerce share of the retail pie is substantial.

"According to McKinsey, China is home to the largest e-commerce market in the world, estimated at over US$630 billion (about RM2.8 trillion) annually in 2015 and accounting for 13.5% of all retail spending in the country. In addition, 'e-tailing' in China is replacing more traditional forms of consumer spending," the research analysts said.

Meanwhile, CIMB Research said two outfits — property developer LBS Bina Group Bhd and commodities firm Genting Plantations Bhd — are the other potential beneficiaries of the DFTZ.

According to the research firm, Genting Plantations owns some 1,100 acres of land in Sepang, which is within 30 minutes from KLIA Aeropolis.

The land, said CIMB Research, is valued at only RM21 million, equivalent to 44 sen per sq ft (psf).

"The development of DFTZ could boost the value of land surrounding KLIA Aeropolis. As such, Genting Plantations is a potential indirect beneficiary. We estimate that every RM5 psf rise in value of Genting Plantation's land in Sepang will boost the group's valuation by RM240 million or 30 sen per share," the analysts added,

As for LBS Bina, it owns some 633 acres of land in Dengkil, which is less than 20km from KLIA.

"LBS Bina plans to undertake the maiden launch on the Dengkil land in the second half of this year, and the newsflow about KL Aeropolis could enhance the take-up rate of the development," the firm added.

CIMB Research has an add call, equivalent to buy, on all four counters — MAHB, DRB-Hicom, Genting Plantations and LBS Bina — with a target price of RM8.30, RM1.69, RM12.30 and RM1.95 respectively.

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