Kuala Lumpur: Bandar Raya Developments Bhd (BRDB) may sell its prime assets to buy more land in the Klang Valley, Penang and Johor as its current landbank is depleting, analysts said.

It may agree on a price of RM1.2 billion, which is about 27 per cent more than their book value.

They said BRDB wants to increase its property development activities to improve earnings, which have been below par lately.

For the quarter ended June 30 2011, BRDB posted a net profit of RM17.1 million, down from RM84 million in the same period last year.

"The stock has been trading below its true value as its earnings have not been as good as expected. Only recently BRDB had been more active in terms of launches," said a senior analyst with MIDF Research.

BRDB, which has four ongoing projects, has less than 25 hectares of land in Bangsar, Dutamas, Seri Kembangan and Taman Duta, and some 124ha of land in Johor.

On Monday, BRDB's major shareholder Ambang Sehati Sdn Bhd, controlled by its chairman Datuk Mohamed Moiz Jabir Mohamed Ali Moiz, had offered to buy some of its assets.

These include The Bangsar Shopping Centre, Menara BRDB, CapSquare Retail Centre in Kuala Lumpur, and Permas Jusco Mall in Johor.

BRDB has, until September 19, to decide on the offer.

The company had appointed CIMB Investment Bank Bhd as its main adviser to evaluate the offer.

"It is obvious that the owner is taking the good assets. He may eventually flip it in a few years to make back his money. Retail assets are very valuable in Malaysia.

"Most of them are trophy properties … not high value assets except for BSC which is a cash cow for the company," said another analyst.

According to BRDB's 2010 Annual Report, the value for BSC and Menara BRDB is RM660 million while Cap-Square Retail Centre and Permas Jusco Mall are valued at RM214 million and RM68 million, respectively.

OSK Investment Bank Bhd director and head of equity ca-pital markets, Gan Kim Khoon, thinks BRDB will sell the properties and prove to shareholders that they will stand to benefit from the disposal.

"BRDB will make quite a substantial capital gain from the disposal. Otherwise, it won't make sense to dispose of these income-generating assets.

"If BRDB is offered a good deal to sell the assets with substantial capital gain, that may outweigh the loss of future income stream. BRDB can generate income from property development projects," Gan told Business Times.

SOURCE: Business Times