Rojana Industrial Park
Acquisition of Pluakdaeng Industrial Park HOLD (maintained) Target Price: Bt6.60 Price (02/04/12): Bt6.55
Rojana Industrial Park Plc (ROJNA)
What’s new? ROJNA will acquire 100% of Pluakdaeng Industrial Park (PIP) at a price of Bt444m (7.5x BV). The transaction is expected to be completed before the end April 2012. PIP is an undeveloped industrial park (located near HEMRAJ’s Eastern Seaboard IE) with raw land totaling 528 rai.
Quite expensive: The cost per rai is Bt0.84m. By comparison, in 2004, HEMRAJ bought 9,300 rai (including an option to buy) from KK-JCTI for a total price of Bt2.15bn, or just Bt0.23m per rai. As PIP is located close to the HEMRAJ estate, the purchase price should have been comparable under normal circumstances. ROJNA will almost get nothing from PIP, based on a development cost of Bt0.5-0.7m/rai. But the firm said it also bought land abutting PIP (but declined to disclose the area). We assume an area of at least 500 rai and that the acquisition price was much lower than for PIP (in order to make the project more feasible).
Bt0.40/share value addition: The value would derive from the additional land plot. We assume extra land of about 500 rai at an acquisition cost of Bt0.5m/rai, 40% below the price paid for PIP. The accretion value from the deal would be Bt0.40/share.
Is this plot for Honda? Management said ROJNA has been talking with a potential customer that intends to buy land in this new estate. We assume that the client will buy a large plot and has scope to expand further, otherwise ROJNA wouldn’t have bought PIP at such a high price. The advantage of the estate is that the development period will be much shorter than for a greenfield investment. We suspect that the customer in question is Honda, as it has good relationship with ROJNA and said a few weeks ago that it is looking to build a new plant on the Eastern Seaboard.
Action: Although the deal has caused us to raise our target price to Bt6.60 from Bt6.20, the upside to our target price is limited. We, thus, maintain our HOLD rating on ROJNA for the moment. We prefer HEMRAJ—our top pick in the Industrial Property sector.
