Rojana Industrial Park

Rojana Industrial Park Plc (ROJNA)

What’s new: ROJNA will acquire 80% of Prosperity Industrial Estate (PIE) from the Srivikorn family for a price of Bt833.5m (2.3x BV). The transaction will be completed within the next 45 days. PIE is an undeveloped industrial estate in Prachinburi (around 100km northeast of Amata Nakorn and near 304 Industrial Estate) holding raw land of 3,235 rai.
May make a small gain this year: Management told us that ROJNA will sell part of the raw land to a third party, then develop the remaining plot into an industrial estate (the firm has yet to disclose the exact land area; we assume it would be around 2,000 rai). The revenue from the sale to a third party should be booked this year, but we expect only a small gain.
Increases the visibility of FY13 land sales and FY14 earnings: The firm said PIE won’t have any impact on the FY12 land sales target of 1,000 rai. The estate should count toward land sales in FY13; the first plot may transfer to a customer in late FY13 at the earliest.
Additional value of Bt0.69/share: Although the acquisition cost is 2.3x above book value, the acquisition cost per rai of Bt0.32m is in line with the market price for raw land in the area. Assuming a total industrial estate size of 2,000 rai and a land price of Bt2m/rai (the same price as at 304 Industrial Park located nearby), the accretion value from the deal would be Bt0.69/share. However, at the moment, we have yet to factor the earnings and value accretion from PIE into our model; we will wait till management announces a clear development plan.
Action: We view the deal as positive for ROJNA. Not only will the purchase increase earnings visibility and add value to the firm, but it reduces overall company risk by diversifying the range of locations. We maintain our BUY rating with a YE12 target price of Bt10.50.