Gallant: FY10 results in line. Revenue +19.1% yoy on the back of utilities, land sales, and a slight recovery in its resorts operations business, as Bintan saw visitor numbers grow 5% yoy. Net profit came in at $9.4m, a sharp turnaround from a loss of $10.5m a year ago, led by contributions from land sales in Lagoi Bay worth $33m. There remains $50-55m worth of land sales pending title transfer and recognition...
Mgt is currently negotiating more deals, and is optimistic that they will go through, given the higher tourist arrivals and completion of new attractions in Bintan. Returns from an iron ore subsidiary should also start giving earnings a lift this year.
No dividends. Stock trades at 0.76x P/B.
I think the market is falling in love with Gallant, pushing the stock steadily upward. Now at 41 cents, a good recovery from 33 cents but apparently with lots of upside to 70+ which is the target price of Kim Eng Research all this while.
DBS Vickers Securities in an Apr 6 research report says: "Gallant Venture (GV), a master developer of industrial parks and resorts in Bintan and Batam, owns over 18,000 ha undeveloped landbank on Bintan island held at its historical cost of S$0.78 – $10.95psm.
"GV’s $14.8 million investment in a 29.4% stake in PT Silo, which operates an iron ore mining business was a bargain in a fire sale, and its 48% interest in a downtown Shanghai property project could yield >2x return on investment.
"Gallant Venture will unlock substantial value from more land sales sparked by the Lagoi Bay development, where the group has and is projected to sell its plots at an average of c$120psm, against expected development cost of c$35 psm and substantial windfall gains from its opportunistic investment projects.
"Our SOTP-based target price of 88 cents offers over than 100% upside. BUY (re-initiating coverage)."
What do the champions, DBS V & Kim Eng, say? Gallant Venture (GALV SP, $0.445, BUY, TP $0.75) – Gallant Venture reported a loss of $3m for 1Q11, which was below our expectation. Revenue declined by 7.1% from $47.9m to $44.5m following a drop in utilities demand in its industrial parks as activities slowed in February during the Chinese New Year. Margins were weaker, too, on higher oil and gas prices. In addition, there was no land sale recognition from its outstanding orderbook of $55m. Maintain BUY with a target price of $0.75, based on SOTP valuation. - Kim Eng
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