1. Price at RM1.33 as of 9-Dec-2010 close. Undemanding Price To NTA of 0.45x only.
2. Paid 7 sen dividend consistently in the past 5 Financial Years. Historical Div Yield of 5.26%.
3. Pure proxy to Iskandar investment theme with 3,055 acres of land in Johor.
4. Laggards among Iskandar related stocks (UEMLAND moved long time ago, KSL moved since Monday, CRESNDO still has not moved).
5. Potential to increase to RM2.55 (if market value it at same P/NTA same as KSL)
Company Background
Established in 1989, Crescendo Corporation Bhd (CRESNDO) is mainly involved in property development and construction related activities in Johor. CRESNDO gained its listing status on Main Board of KLSE on 8-Apr-2010. Apart from property and construction division, CRESNDO also generates revenue from education and property investment and management services.
Over the past 11 years, CRESNDO has established a niche in industrial property development. Its flagship industrial park is known as Taman Perindustrian Cemerlang (TPC) and currently has more than 700 established factories operating in it. TPC is located near Johor Bahru and is one of the largest private industrial estates in Johor.
Click here for the Group Structure Link to CRESNDO Group Structure
CRESNDO is a pure proxy to Iskandar investment theme as the Company owns a total of 3,055 acres of land in Johor, out of which 1,735 acres of it is within the boundary of Iskandar Malaysia (as of 31-July-2010). The Group specializes in the development of industrial properties (which has higher margins vs commercial and residential property), with 724 units of them (valued at RM597.1m) completed and sold so far. For residential and commercial development properties, 4,316 units of them (valued at RM455.2m) completed and sold so far.
Currently, CRESNDO’s main ongoing project is Nusa Cemerlang Industrial Park (NCIP), which consists of 353 units of factories on 527 acres of gross industrial development land. To date, 157 units of detached and semi-detached factories with Gross Development Value (GDV) of RM465m have been launched. Out of this, 101 units of factories with GDV of RM273m have been sold.
In addition, the Company’s other ongoing projects include Bandar Cemerlang, Taman Perindustrian Cemerlang, Desa Cemerlang and Taman Dato’ Chellam.
Management
Since listed on 8-Apr-1997, the Gooi family remained as the main owners of the Company with 66.29% ownership as of 15 June 2010 and continued to be the main driver of the Company.
The Board is still dominated by members of the Gooi family supported by independent directors who are professional. The management team is experienced with its Chairman and Managing Director Mr Gooi Seong Lim has been with the Company for 35 years.
Financials
CRESNDO registered 1H2011 revenue of RM99.4m, representing 25.6% growth as compared to 1H2010. The significantly higher revenue is attributed to higher sales in construction services and concrete products. EBIT is higher due to higher margin from industrial properties as well as construction operations.
CRESNDO’s balance sheet is relatively healthy with: i) current ratio increased to 3.0x in 1H2011 from 2.4x as of end FY2010 and ii) quick ratio increased to 2.2x in 1H2011 from 1.5x as of end FY2010.
CRESNDO has paid 7 sen dividend consecutively in the past 5 financial years, comprising 3 sen interim dividend and 4 sen final dividend. On 28-Sep-2010, CRESNDO has announced higher interim dividend of 4 sen per share, which is higher than its historical interim dividend of 3 sen. It is also worth to note that the ex-date of the 4 sen dividend has not been announced.
Assuming that last year final dividend of 4 sen is maintained, then total dividend for FY2011 will be 8 sen. This translates into attractive dividend yield of 6.0%, which is significantly higher than many other property stocks.
Valuation by Price To Net Tangible Asset comparison
One of the best way to value Property stocks is by using Price to Book Value ratio or PBR (provided there is none or small Intangible Asset in the Company). Besides CRESNDO, there are 2 companies with huge lands in Johor i.e. UEMLAND and KSL.
As of 9-Dec closing price:
UEMLAND: Share price RM2.58, NTA per share: 68.92 sen, P/NTA: 3.74x
KSL: Share price RM1.78, NTA per share: RM2.08, P/NTA: 0.86x
One would argue that CRESNDO should be valued at the same P/NTA with KSL. Both are property developers in Johor. From dividend perspective, for last financial year, CRESNDO paid 7 sen dividend while KSL paid 5 sen.
KSL share price has increased quite substantially from RM1.56 on 6-Dec to RM1.78 as of 9-Dec. The reasons may be due to increasing awareness from investors on laggards among Iskandar related stocks. If you have missed out on KSL share increase, CRESNDO is the one you should be looking at.
Assuming same P/NTA of 0.86x (same as KSL), CRESNDO has the potential to go up to RM2.55.
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