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laucsh77 : Platinum — Is this developer too conservative to keep up with the Johor industrial boom and keep steady on its cash?
05/07/2024
Real estate is booming in Johor, fueled by the DATA CENTRE (DATA CENTRE), and industrial sites are in high demand; many developers are scrambling to rush into industrial land development.
Some developers are quickly divesting their industrial land, while others are preparing to come and build data centers.
A developer from Johor stayed on hold, insisting on only developing the projects they already have, and not chasing the craze.
Is this a conservative or sensible approach?
“Nine Point Stock” compiles company information for Platinum members as a reference for Platinum members.
This “calm” developer is Tengyu Group (AME 5293). The latest stock price is RM1.70, with a market capitalization of RM89.1 million.
Based on RM1.70, Tengyu Group's capital to profit ratio is 11.70 times, and net tangible assets per share are RM1.37.
Chen Derong, CEO of Tengyu Group, said in an exclusive interview with the authoritative financial weekly THE EDGE, that the company adheres to the “design and construction” strategy, will not acquire a large number of industrial sites, and quickly launch more industrial land products.
He said that having a huge treasury is like two sides. If it cannot be built and sold quickly, land holding costs will be a heavy burden when the industrial market declines.
He pointed out that the industrial park development plan introduced by Tengyu Group has a cycle of 7 years.
“For example, our newest industrial park is the “Southern Industrial and Logistics Park” and “SILC” (SOUTHERN INDUSTRIES & LOGISTICS CLUSTERS), which will be completed in a short 7-year cycle due to intense market demand.”
The company recently spent RM0.1 billion 6.17 million in cash to acquire three sections of land leasehold in Kulai, Johor, with a total area of 37.5 acres.
Chen Derong said that Teng Yu will develop these three sections of land into another industrial park.
After completing the acquisition, Tengyu Group's basement in Johor was 302.2 acres, which is double that of the Penang basement.
Tengyu Group crossed states to Penang in August 2022 to acquire 175.98 acres of industrial land in Victoria, and spent RM0.1 billion 30 million.
This section of land is a joint development with MAJESTIC Group, with a development value of RM1 billion.
Chen Derong reminded investors to understand whether the demand for industrial land in Johor is it a real market demand or a short-term effect of the Sino-US trade war.
Tengyu recorded a net profit of RM93.1 million for the fiscal year ending March 31 this year, a year-on-year decrease of 8.3%.
The largest shareholders of Tengyu Group are Lin Youjin and Li Cai. The two jointly hold 19.16% of the shares, and Jiang Yazhi holds 18.86% of the shares, making them the second largest shareholder.
Of the three major shareholders, only Li Cai is on the board of directors. He holds the position of managing director.
Tengyu Group previously packaged the industrial industry and listed it through AMEREIT 5307 (AMEREIT 5307). Tengyu Group held 49.62% of Tengyu Real Estate's shares.
Tengyu Group is a net cash company. Cash on hand is RM0.2 billion79.74 million, and short-term credit is RM0.1 billion37.7 million.
The total development value of the group's plans is RM1.2 billion40 million, and the order received is RM0.2 billion76 million.
Instead of stealing the Johor data center boom, some investors believe that Tengyu Group has a conservative style of work, let alone make good use of cash, and step up development efforts.
However, staying calm in the midst of the boom could have a different outcome.
Phillip Securities advises customers to “buy”. The target price is RM2.15.
Tengyu Group is steady and stable. Is it your favorite target target?