Selangor Dredging Berhad

Kenanga has given very high target price for SDRED in a research report from them - RM1.84. Below are the important notes from the report:


1Q08 net profit of RM8.7m was within our expectations at 23% of our full year forecast of RM37.6m. 1Q08 net profit mainly attributed by stronger recognition of earnings from Park Seven which is fully sold and having completed the basement level is progressing rapidly above ground level. In addition, there was also the recognition from the sale of Ameera condominium units launched in January 2007 which are more than 70% sold.


QoQ, 1Q08 net profit was 19.8% lower than 4Q07 where one off gain and write back of accrued tax of RM6.1m and RM3.2m respectively was recognised. In comparison, 1Q08 operating profit of RM12.1m was 252.9% higher than 4Q07’s RM3.4m. 4Q07 is seasonally slower quarter given the shorter working days accounting for the festive holidays. In addition, the construction cost incurred at Ameera was not matched by progressive claims being ground clearing, piling and basement work. Marketing expenses for the launch in January 2007 was also expensed when incurred.

YoY, 1Q08 net profit was 280% higher! In 1Q07, Selangor Dredging only had Amansari and Park Seven projects to rely on. The progress of work for Park Seven was still at basement levels where progress billings were limited. In addition, the hotel made RM2.2m pre-tax loss compared to RM889,000 pre-tax loss in 1Q08. 1Q07 income tax rate was 42% due to unavailability of group relief for losses incurred by a subsidiary company.Tax rate was 11% in 1Q08 due to non-taxable income and tax losses brought forward. We expect tax rate to normalise to statutory rate in succeeding quarters.

We are maintaining FY08 and FY09 net profit forecast. The slated projects for launches are still on schedule. The RM230m 20 Trees will be launched this Saturday while the two Singapore projects worth RM620m will be launched in November and second half of 2008.


Maintain BUY with target price of RM1.84 based on sum of parts RNAV. We remain positive that the company is on the right track as the future development pipeline remains exciting and their projects have been well received. FY08E and FY09E PER multiples of 11.1x and 7.5x remains attractive.