Bandaraya Development ('BRDB') is involved in property development & investment as well as the manufacturing of chipboard (which is carried out by its listed 5.67%-owned subsidiary, Mieco Chipboard Bhd).
Past 5 years' results
The group's strong performance of 2002-2004 was interrupted in 2005 due to poor performance of Mieco (which saw its profit contribution dropping from RM35.0 mil to a mere RM5.5 mil due to intense competition amongst the chipboard manufacturers as a few manufacturers and Mieco had expanded their capacity at the same time in 2004/5). In addition, BRDB has also made provision for impairment loss for its property development cost amounting to RM44.0 mil in 2005. I believe that the worst is behind the group as the chipboard sector has already shown some recovery (maybe benefiting from the spillover effect of good plywood prices) and high-end properties have also recovered in the second half of this year.
Table 1: BRDB's past 5 years' results
Recent Financial Results
For the first 9 months of FY2006, BRDB reported a net profit of RM180k as compared to a loss of RM15.8 mil previously. This was achieved on a 19.3%-increase in turnover from RM328 mil to RM391 mil. The net profit could have been much better if not for additional tax incurred due to under-provision of prior years tax of RM5.4 mil.
Table 2: BRDB's past 8 quarters' results
Valuation
As BRDB's earning is not stable yet, its PE is hard to estimate. Nevertheless, based on its book vale of RM2.89 per share & the share price of RM1.25 as at December 26, BRDB is now trading at price to book of 0.43 times only. This is very undemanding.
Technical outlook
BRDB has finally broken above its downtrend last week. The breakout level is RM1.16/20. With this breakout & the weekly MACD crossing above the zero line, the prospect of BRDB looks promsing.
Chart: BRDB's weekly chart as at Dec 26
Conclusion
Based on undemanding valuation & promising technical set-up, I believe BRDB is an attractive stock for medium-term investment.
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