Land & General - Update

Before we proceed, I would like to invite you to read our disclaimer and also warn that this article may be biased as I am pretty bullish on L&G.

This is actually a write up to update on the performance of L&G since it was last featured few months ago.
How did it perform this quarter?
60 Million profit for this quarter! Nearly 300% the earnings on the preceeding year quarterly result. 
The purpose of this update is actually not to simply discuss about the increase in profit of this company even though I am more than delighted that this company continues to surprise and exceed my expectation quarter after quarter. The main purpose,however, is to do a better valuation towards this company as I think I have been pretty loose on it previously. Now, the question is, is this company still worth investing?
Valuation was difficult due to the existance of ICULS but since most of the ICULS were converted in the last quarter, I think it is easier for us to do a proper valuation. Before we proceed to calculating the diluted earnings per share of the company, let us find out what's the number of shares as of 26/11/2014.

No of Shares Outstanding = 1,053,117,816
No of ICULS yet to be converted = 143,206,744
Total Shares Assuming All ICULS Converted = 1,196,324,560.


The total amount of shares assuming all ICULS are converted (Fully Diluted) is about 1.2 Billion Shares. The current quarter result is about 60 Million in profit which translates to an earning per share of 5 cents for this quarter alone.
Assuming that this quarterly result is consistent throughout the year, this company will earn an earning per share of 20 cents. At the current valuation of 0.55, the projected PE for this company will be less than 2.75! (That's cheap!)

But of course, I don't think this earning can be sustained.


Projected EPS = 0.15/ Year.

Need more justification why I think this is a good buy?
Book Value = RM 690 Million / 1200 Million Shares = RM 0.575. (Refer the image above).
At current price, you're buying this business below it's book value.
If you look at the quality of the asset, it is actually very good. Out of the 1 Billion Ringgit Asset, 443 Million of it is Cash & Cash Equivalents. Not to be forgotten, it's agricultural land (Oil Palm & Rubber Tree) in Mukim Kerling, Ulu Selangor of is only written as 48 Million in the book where the real value should be close to 235 Million.( Refer the image below).
1 hectare = 2.4 acres 
1 Acres is worth around RM98,000.
1000 Hacteres equal 2400 acres equal to a value of (2400*98,000) = 235 Mil.
Refer below:

At current price, you're getting the business at a discount to the book value (that is,in my opinion quite conservatively written) but not only that, you get the competent manager, Mr.Low Gay Teck ( Regarded by many as the White Knight Of L&G for the ability to turn L&G around in a few year. Note: He is also the MD of Mayland previously.) and also some part of the 600 Million Unbilled Sales mentioned by them previously (I'm not sure how much is left) for free.

If you want to put a conservative valuation to this company, assume this, you're going to buy this business as a whole. It seem to have plenty of good projects on the pipeline, a quite competent management is already in place and the financial position is quite healthy. 
The question is how much are you willing to pay?
Is it safe to presume that paying for the book value + a premium of 5 years earning will be conservative? If so, then the valuation will be like the following:
Book Value (0.575) + 5*Projected Yearly Earnings (0.15) = RM 1.325
Yes, I am saying that I believe this share is worth RM1.325.( I may sell before it reaches this price) and that's a potential 200% gain. I do realize that my valuations can be more conservative in terms of projected earnings but I think at the current price, this is a real bargain. Remember, this is not a recommendation to buy or sell, this article is strictly educational. Any action resulting from the use of this article is on your own risk.