Dijaya Corp's (RM1.04) share price has lagged its property peers in the recent rally. This is partly due to the fact that it share price has been less volatile and largely resilient earlier. After falling from an earlier peak of around RM1.50 in early 2008, its share price hovered at the 90 sen to RM1.00 range over the past one year. Its shares are also not widely owned by institutional investors.
At the current share price of RM1.03, Dijaya's shares are deeply undervalued, trading at low price-to-earnings (P/Es) multiples of 8.5 and 5.6 times 2009-10 earnings, and a steep 58% below its latest book value of RM2.48, as of March 2009.
Its net trading asset (NTA) is already severely understated due to low land costs. The bulk of its land bank is in the prime developments of Tropicana Golf and Country Resort and Tropicana Indah in Petaling Jaya, which are carried in its books at just RM10.66 psf and RM8.10 psf, respectively — against current market prices of RM130-150 psf.
Balance sheet is very strong — Dijaya is one of very few developers that are ungeared. Despite paying for earlier land purchases (RM66.2 million for land in Kajang and Cheras) and funding for the ongoing Tropicana City development, the company had net cash and equivalents of RM27.7 million in March 2009.
If market sentiment stays positive, we would expect investors to start focusing on laggards. Dijaya offers good value, even though it is off most investors' radar screens, with its low P/Es and price-to-book valuations. A potential re-rating catalyst could emerge later as the company launches its two new Tropicana developments, which will boost earnings in the next few years.
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