KUALA LUMPUR (May 15): Analysts have given Main-Market bound Radium Development Bhd's stock fair values of between 51 sen and 59.5 sen, based on the group’s impressive sales track record and steady earnings visibility on the back of projects worth RM3.36 billion in gross development value (GDV), as well as strong demand for affordable housing in the capital.
TA Securities Research said it pegged Radium at 51 sen per share, based on an estimated earnings per share (EPS) of 3.5 sen for the financial year ending Dec 31, 2024 (FY2024), and a target price-earnings ratio (PER) of 14.5 times.
“Our target PER of 14.5 times is at a premium to the market-capitalised weighted average implied target PER of 13.2 times for developers, with a market capitalisation of above RM1 billion,” it said in a note.
JF Apex Securities Bhd valued it at 55 sen — which represents a 10% potential upside to its initial public offering (IPO) price of 50 sen — based on an estimated FY2024 EPS of 4.11 sen for the property developer and its peers’ forward PER of 13.5 times.
Malacca Securities Research, on the other hand, set the stock’s fair value at 59.5 sen, pegged at a market-cap weighted P/E of 18.1 times. “Radium’s forward P/E valuation for FY2024 is at 15.2 times, based on our estimated FY2024 EPS of 3.3 sen,” it said.
Radium focuses primarily on the development of high-rise residential properties in strategic locations within Kuala Lumpur at competitive prices. Their residential properties include condominiums, serviced apartments, suite apartments and Soho units.
The group, which is slated to be listed on May 31, will have a market capitalisation of RM1.74 billion upon listing, based on an enlarged share capital of 3.47 billion shares at 50 sen per share.
The IPO exercise is expected to raise RM434 million, with the proceeds to be used for land acquisition, repayment of borrowings, hotel construction, working capital and listing expenses.
Earnings projections
On the financial front, TA Securities projected that the group’s earnings had declined by 22% in FY2022, and would fall another 9% in FY2023, with core net profit of RM79.2 million for FY2022 and RM72.3 million for FY2023, due to the absence of new launches between 2021 and 2022.
It is also due to the fact that the group had completed both Residensi Semarak Platinum and Residensi Vista Wirajaya in 2021, and PV9 @ Taman Melati in November 2022, with Residensi Vista Sentul scheduled to be completed in the second quarter of this year.
“However, we anticipate a rebound in Radium’s financial performance in FY2024 and FY2025, with projected earnings growth of 70% and then 36% to reach RM122.8 million (FY2024) and RM167.1 million (FY2025),” it added.
Malacca Securities estimated that the group’s revenue had declined to RM362.4 million in FY2022, before heading higher to RM455.1 million in FY2023 and RM585 million in FY2024, driven by two development projects — namely Residensi Vista Wirajaya and Residensi Semarak Platinum.
“Nevertheless, moving forward, we project the core net profit to see improvement by 27.3% and 13.0% respectively, to RM100.6 million and RM113.7 million for FY2023-FY2024, owing to higher recognition of progress billings, in tandem with the re-opening of economic activities, existing unbilled sales, as well as ongoing and future projects valued at RM3.36 billion GDV, going forward,” it said.
JF Apex Securities Research, meanwhile, said the group’s revenue is expected to grow 58% in FY2024, boosting net profit by 54%.
According to Radium’s pro-forma balance sheet post-IPO and utilisation of IPO proceeds, the group will have a net cash of RM323 million or 9.3 sen per share, compared with RM37.15 million or 1.1 sen per share as at end-2021.
Dividend policy
Radium has a dividend policy to distribute at least 30% of its net profit to shareholders, from FY2022.
TA Securities expects the group to pay dividends of 0.7 sen to 1.55 sen per share from FY2022 to FY2025, premised on a payout ratio of 31% to 35%.
“This would translate into dividend yields of 1.4% to 3.1%, based on the IPO price of 50 sen per share,” said TA Securities.