9 April 2008 by Asia Analytica Selangor Properties Berhad Prime land bank, asset and cash rich Strategic assets ripe for redevelopment Batai condos and E&O JV may provide re-rating catalysts RNAV of RM6.08 – fair value at RM4.26

BUY Key stock statistics FYOct07 FYOct08E EPS (sen) 23.5 20.7 P/E (x) 12.6 14.3 DPS (sen) 10.0 10.0 NTA/share (RM) 4.79 4.90 Issued capital (mil) 343.6 52-week price range (RM) 2.93-5.30

Major shareholders (%) Kayin Holdings 61.0

EPF 4.5

Share Price Chart (RM)

Price RM2.95 Market capitalization RM1,014 million Board Main Indices KLCI Sector Properties Stock code 1783 Analyst Kevin Khoo Investment Summary Selangor Properties (Selprop) is one of Malaysia’s oldest property companies – with sizeable and valuable property assets, and a very strong balance sheet to boot. It has 33 acres of undeveloped and very valuable land in the prime suburb of – making it one of the largest landowners there. Selprop also has several well-located commercial and residential buildings, mainly in Damansara Heights, 270 acres of land in Ulu Langat, Batu Caves and Selayang, a shopping mall in Australia and a portfolio of investment securities. The company also has a 51% stake in Second Board listed HELP International Corp, one of Malaysia’s top private education players. Of the 33-acre Damansara Heights land bank, 19.8 acres is strategically located within the Damansara Town Centre area, adjacent to its own Menara Milenium and two upcoming projects – GuocoLand’s Damansara City and The Twins. These two projects (with pricing of RM850 psf for The Twins) will enhance the value of Selprop’s land and provide new pricing benchmarks. Selprop is generally perceived to be a “sleepy” company. Despite its quality land bank, it has not been aggressive in launches or replenishing the land bank. However, there are promising signs this is starting to change. The company has entered into a joint venture with E&O Property Development to develop 9.4 acres of land along Jalan Semantan in Damansara Heights. This will likely kick-off next year. On its own, it will soon develop a high-end condo project located along Jalan Batai, also in Damansara Heights. GDV is estimated at around RM300 million for 107 units of high-end large- sized condos, expected to be launched later this year. Over the past few years, there have been a large number of asset sales, especially with regard to its Australian assets and parts of its Damansara Heights land. The company also makes gains on its investment portfolio. While these moves have realized more value and boosted profits, they may also suggest a high level of volatility in profits. Selprop’s assets were revalued in Nov 2006, in accordance with current accounting standards. This boosted NTA per share to RM4.79 in Oct 2007 from RM3.86 in Oct 2006. We estimate its RNAV at RM6.08 per share. Assuming a 30% discount to RNAV, we place its longer-term fair value at RM4.26 – 44% higher than the current share price. Selprop’s share price has fallen 45% from its peak a year ago, reflecting the weak appetite for property stocks. We like its quality land bank, high asset values and prudent management – a plus in the current environment. Its shares offer good value for longer-term investors. BUY. The Batai condo and E&O joint venture projects should provide some re-rating catalysts and will boost earnings over the next few years.

 Selangor Properties Berhad Background Selangor Properties (Selprop) is one of Malaysia’s oldest property companies, and is involved in property development and investments, as well as education. It has 33 acres of undeveloped land in Damansara Heights, several commercial and residential buildings, a total of 270 acres of land in Ulu Langat, Batu Caves and Selayang and substantial investments overseas, particularly in Australia and a large portfolio of investment securities. The low-profile company was listed in 1963 and traces its roots back to the 1950s, when its founders, the late Tan Sri T.K. Wen and his wife, Puan Sri Chong Chook Yew acquired large tracks of rubber plantation land from a foreign firm. The land, located in the outskirts of Kuala Lumpur, have since been developed into one of the Klang Valley’s most prestigious suburbs, Damansara Heights. The company is run by the Wen family, who raised their stake to 61% in 2005 after undertaking a general offer for the company at RM2.40 per share. Puan Sri Chong is currently the company’s chairperson and her son, Mr. Wen Chiu Chi, the managing director.

Corporate structure

Selangor Properties Bhd

Property holding Property Education & investments development

Bangsar Hill Jupiter Midas HELP Holdings (100%) (100%) International Corp (51%)

Chong Chook Yew Karuan Jaya Holdings (100%) (100%)

Damansara Devts Selayang Mulia (100%) (100%)

Pusat Bandar Sabaran (M) Damansara (100%) (100%)

SPB Australia (100%)

Oriland (100%)

 Selangor Properties Berhad Business Overview Selprop has three main core businesses – property development, property and investment holdings and education. In FY07, property development contributed 36% of revenue but just 2% pre-tax profits. They are derived from two ongoing lower-end housing projects – Bukit Permata in Batu Caves and Selayang Mulia in Selayang, both within the Klang Valley. The bulk of Selprop’s profits come from property and investment holdings, which accounted for 33% of revenue and 85% of pre-tax profits in FY07. This includes rental income from its investment properties in Malaysia and Australia, periodic gains from the disposal of properties and returns from a portfolio of investment securities. The balance comes from education – via 51% owned HELP International Corp, listed on the Second Board in 2007. A highly regarded private education institution, HELP has University College status and about 10,000 students in two main campuses – in the Damansara Heights area and the recently acquired Klang-based Sepang Institute of Education (renamed HELP-ICT).

Revenue breakdown

Pre-tax profit breakdown

 Selangor Properties Berhad Key Investment Highlights

Prime land bank & portfolio Selprop is one of the largest landowners in the matured and prestigious Damansara Heights area, with 33 acres of undeveloped land. Within the area, it also has a number of commercial properties held for rental and investment, plus several assets recently parked into a 50:50 joint venture with E&O Property Development for joint development. Selprop’s property investment portfolio consists of Menara Milenium, Wisma Damansara, SPB Towers and Wisma HELP, all located in Damansara Heights. The jewel in the crown is Menara Millenium, a 25-storey office tower with 573,175 sq ft of net lettable space on 3.8 acres, widely considered as the area’s most prestigious office address and is fully tenanted. Contributions from the other buildings are relatively minimal. Wisma Damansara’s occupancy rate is just 21% as most of the government offices there have relocated to . HELP occupies the bulk of space in Wisma HELP. Wisma Damansara has been earmarked for potential redevelopment and sold to a joint venture with E&O Property Devt. Annual recurring rental income from these properties is about RM36 million.

Land value boosted by neighbouring projects Of Selprop’s 33-acre Damansara Heights land bank, 19.8 acres is located within the Damansara Town Centre area, adjacent to Menara Milenium and two upcoming projects – GuocoLand’s Damansara City and The Twins by Panareno, a joint venture between the Lion Group and AIG. The Twins project is ironically located on land earlier sold by Selprop back in 2005 to Panareno at RM420 psf. The 318-unit project on 2.17 acres of land was launched late last year and set a new benchmark price of RM850psf for Klang Valley condominiums outside of the KLCC area. Pricing details for GuocoLand’s 8.5-acre project are still unavailable, although tentative plans include two blocks of condominiums, two office towers, a hotel and a retail podium. It could up the pricing ante further, given the strong response to The Twins and the high KLCC area prices of RM1,200–2,000 psf. These two developments will further enhance the value of Selprop’s land.

Jalan Batai condominiums Selprop is planning to launch a luxury condominium project on Jalan Batai, next to its existing SPB Towers, later this year. This will be its first major project within Damansara Heights in eight years, since the completion of Menara Milenium. And it will be a positive catalyst to dispel the company’s “sleepy” image. The project will consist of 107 units of condos with built-up space of 3,000-3,500 sq ft. Given the pricing trends in the area, we expect pricing to be upwards of RM800 psf and GDV of around RM300 million. Margins should be high (estimated at 40%) due to low land costs and the project will contribute to profits over FY09-11.

 Selangor Properties Berhad Investment properties – some ripe for redevelopment Selprop has a number of investment buildings presently held for rental, but which can be redeveloped at some stage. Many of these assets are aging, with low yields and density, but are strategically located within Damansara Heights, one in and one in the city centre. Its portfolio of investment properties include: • Kompleks Pejabat Damansara – five blocks of 4-storey office buildings on 3.9 acres with 210,000 sq ft of NLA. • SPB Towers – a 17-storey apartment building sitting on 3 acres along Jalan Batai. • Jalan Batai shops – 16 units of 2-storey shops on prime Jalan Batai, with highway frontage and opposite the Damansara Town Centre, sitting on 1.8 acres of land. • Taman Tunku flats – 1.9 acres of land in Bukit Tunku. Consists of five blocks of four-storey buildings with 86 units of flats and eight shops. • Wenworth hotel – a low-rise hotel sitting on 56,954 sq ft of land on Jalan Yew in Kuala Lumpur. The group has several other assets, which are being injected into a joint venture with E&O Property Devt (see below) for redevelopment.

Joint venture with E&O – unlocking value Selprop has set up a joint venture with E&O Property Development to jointly undertake a mixed development project and unlock the value of several of its properties in Damansara Heights. Under the deal, Puncak Madu Sdn Bhd, a 50-50 jointly owned company acquired the 16-storey Wisma Damansara, with NLA of 269,535 sq ft on 2.8 acres of land along Jalan Semantan from SelProp for RM100 million, or RM371 psf on a NLA basis. The 37-year old Wisma Damansara’s occupancy rate is just 21% as most of its government tenants have moved to Putrajaya. This land adjoins another 6.6 acres that the joint venture company earlier acquired from Selprop in February 2005 for RM124.5 million or RM433 psf. With the acquisition, the parties will jointly develop the combined sizable 9.4-acre site, which is likely to begin in 2009. This arrangement has allowed Selprop to realize upfront profits of RM30.3 million, reflected in 1QFY08, and leverage on E&O’s more aggressive strategies.

Ongoing developments The company’s on-going property development projects are relatively unexciting, as they are in the low-to-medium segment of the market, with thin margins. Nonetheless, they do provide another form of recurring earnings. It has two projects – Bukit Permata in Batu Caves (63 acres) and Selayang Mulia in Selayang (67 acres), which will last another 4-5 years. Profits from property development totaled just RM2.6 million in FY07, and a loss of RM0.6 million in FY06. The company has another piece of land in Ulu Langat measuring 140 acres, which will be developed later.

 Selangor Properties Berhad Unlocking value from Australian assets Selprop has been unlocking the value of its Australian assets, benefiting from rising property prices and the appreciating Australian Dollar. In 2006, it sold its 50% stakes in the ANZ building and McWhirter Car Park in Brisbane, Queensland, for a total of AUD 81 million, or RM219 million. This yielded a total gain of around RM95.1 million, which was recognized in FY06. In 2007, the company sold its 2.2% stake in Multiplex Group for AUD 94.4 million (or RM278 million) after accepting a general offer from Brookfield BidCo Pty Ltd. The sale yielded gains of AUD 18.4 million, or RM50 million, recognized in FY07. After this, it has two Australian assets left, the Claremont Shopping Centre in Perth and Coolum Lagoon Resort in Queensland.

Perth mall on track for expansion Selprop owns a 50% stake in the Claremont Shopping Centre, Perth, Australia. The popular shopping mall is located in the suburb of Claremont, 7 km west of Perth’s central business district, and currently has net lettable area (NLA) of 100,000 sq ft. Together with its 50% joint venture partner Multiplex Limited, Selprop has acquired the neighbouring parcels of land to eventually increase the mall’s NLA from 100,000 sq ft to 300,000 sq ft, as well as develop 82 apartments.

HELP’s education business faring well Selprop has a 51% stake in HELP International Corp, listed on the Second Board of Bursa Malaysia. Established since 1986, HELP is one of Malaysia’s leading providers of education services, offering a wide range of tertiary, as well as pre-university and post-graduate courses. HELP is a pioneer and innovator in tertiary education in Malaysia and is very highly regarded by the education fraternity. It was among the first to introduce foreign “twinning” and external degree programmes – providing local students with lower-cost routes to overseas accredited degrees. “Twinning” (or “2+1”) degree programmes are tertiary courses conducted in collaboration with overseas universities, with degrees conferred by the universities. These programs involve a student spending 2 years in HELP before transferring overseas in the third year. This provides substantial cost savings compared with studying overseas for all three years. HELP has developed strong collaborative relationships with a number of top international universities in the UK, Australia and the US. This attests to its high education standards. It was also one of the first batch of colleges approved to run ‘3+0’ degree programmes in June 1998, where students can obtain an overseas degree locally. In 2004, HELP was awarded “University College” status, allowing it to award its own degrees under the HELP University College brand name. This is a significant achievement and will be a source of future growth. HELP will be able to “create” its own courses and degrees, offer more competitively priced courses and boost margins.

 Selangor Properties Berhad HELP’s domestic and overseas expansion plans HELP is actively looking at opportunities for international franchising to leverage on its branding. We understand it is in advanced stages of exploring tie-ups in Vietnam, Saudi Arabia, China and Indonesia. Its overseas ventures are expected to yield high returns with low risks, as the company does not intend to invest in buildings and assets, but provide the courses, curriculum, degrees, academic support and other services. Apart from its own home-grown degrees and overseas “twinning” courses, HELP can also leverage on its pre-university programmes. It is now one of the largest Edexcel centres in the world, offering quality “A” level education programmes. Edexcel is one of five main UK examination boards, awarding over 1.5 million certificates per year. Back home, HELP it is also expanding aggressively. In Nov 2007, it acquired Sepang Institute of Technology, since renamed HELP International College of Technology (HELP-ICT) for RM2 million, giving it a new market base in Klang. The acquisition was priced very cheaply – at effectively just RM10 psf for a 200,000 sq ft campus space in a popular Klang shopping mall. That also comes with a broad range of courses, university collaborations and a student base of 1,500. With the inclusion of HELP ICT’s students, the HELP group currently has about 10,000 students. The group’s main campus is strategically located in the affluent Damansara Heights area, and is spread over three properties, with total built-up space of 272,426 sq ft. Some of these are owned and the rest are leased from Selprop.

New campus, pushing for “University” status HELP is planning to build its own campus and has just acquired, in mid-March 2008, a 23.3-acre leasehold site in Sungei Buloh, Selangor, for RM20.3 million – or just RM20 psf. The land is located in Subang Delima, and conveniently near the upmarket Damansara, Tropicana and Kota Damansara areas. It is approximately 5km away from Kota Damansara. The total budget, including land costs, is RM100 million, mostly to be spent over 3-4 years. The new campus will provide a larger, more conducive environment and boost its appeal to international students. It will also enable HELP to apply for an upgrade to “University” status, as one of the government’s requirements for that status is an integrated campus with housing facilities. The current city campus will remain in operation after the Subang one is completed.

 Selangor Properties Berhad Earnings forecast for HELP Year-end Oct (RM mil) 2006 2007 2008E 2009E 2010E Revenue 53.5 61.7 76.8 89.4 102.9 Operating profit 13.4 13.3 15.5 21.5 24.5 Depreciation (4.5) (3.2) (4.0) (4.2) (4.5) Interest & other income 3.1 3.2 3.0 0.8 0.2 Pre-tax profit 12.0 13.4 14.5 18.1 20.2 Tax (3.9) (3.7) (4.4) (5.0) (5.5) Minority interests - - - - - Net profit 8.1 9.7 10.2 13.1 14.7

Operating margin (%) 25.1 21.6 20.2 24.0 23.8 Pre-tax margin (%) 22.4 21.7 18.9 20.2 19.6 Net margin (%) 15.1 15.7 13.3 14.6 14.3 Effective tax rate (%) 32.9 27.9 30.0 27.5 27.0

Key Investment Risks

“Sleepy” perception Selprop is generally perceived to be a “sleepy” company. Despite its quality land bank, the company is not in the same league with other major developers when it comes to being aggressive in launches or replenishing its land bank. The company has not made much attempt to develop its Damansara Heights land bank in recent years – the last major project was Menara Milenium some eight years ago. It prefers to sell off small pieces of land to other developers and book in short-term gains (albeit at good prices) – but at the expense of much larger profits if developed on their own. The company may have largely missed out on the recent property upcycle (which is probably at its tail end), but is making amends with the proposed Jalan Batai condo project and the joint venture with E&O Property Devt. We are encouraged by these new developments, which signals a more aggressive stance by management.

Property investor philosophy Selprop’s investment philosophy appears more akin to a property investor rather than a developer. Over the past few years, there have been a large number of asset disposals, especially with regard to its Australian assets and parts of its Damansara Heights land. The company also makes trading gains on its sizable securities investment portfolio. Such a strategy isn’t necessarily bad as the company also has several sources of sustainable income through its rental properties, lower-end housing developments and a highly profitable education arm. However, it does carry some risks – notably the high dependence on asset sales to boost profits. Asset sales have accounted for the bulk of profits in recent years.

 Selangor Properties Berhad Recent asset sales 2005 Sale of 2.2 acre land in Damansara Heights to Panareno for RM 39.8 million. Sale of 6.6 acre land in Damansara Heights to Puncak Madu for RM124.5 million.

2006 Sale of 50% stake in ANZ Center & 50% stake in McWhirter’s car park for AUD 81 million.

2007 Sale of 2.2% stake in Multiplex for AUD 94.4m.

2008 Completion of sale of Wisma Damansara together with its 120,355 sq ft land to Puncak Madu for RM100 million, with pre-tax profit of RM30.3 million.

Strong balance sheet Selprop has a very strong balance sheet, strengthened by the sale of assets in recent years, and a portfolio of short-term investment securities. As at Oct 2007, the company had net cash, liquid assets and equivalents of RM422.2 million – or a substantial RM1.23 per share. This comprises RM467.2 million in short-term portfolio investments, less net operating debts of RM45 million. The investment portfolio is mostly in securities and other instruments and investments held overseas, and are denominated in various currencies. Its latest asset composition is unavailable as the 2007 annual report has not been issued. Although there are a number of risks associated with such portfolio investments (such as market and currency risks), Selprop does not appear to have been affected at all by the recent volatility in global financial markets. For the first quarter ended Jan 2008 – a very volatile period indeed for global markets – its portfolio value grew to RM474.6 million, from RM467.2 million in Oct 2007. In that quarter, it recorded a gain of RM14.6 million from the sale of investment securities. The company can well afford to pay out much higher dividends, but has traditionally been paying consistent dividends of 10 sen per year. We expect this to be maintained – but on a net basis – which provides a decent bank-equivalent net yield of 3.4%.

10 Selangor Properties Berhad Balance sheet As at Oct (RMm) 2007 2006 Fixed assets 1,154.8 1,025.6 Property, plant & equipment 63.0 64.4 Investment properties 553.2 297.2 Land held for devt 508.5 470.4 Other investments 23.5 185.6 Intangibles & others 6.5 7.9

Current assets 988.4 727.2 Devt properties 82.6 30.0 Inventories 21.5 45.4 Receivables 131.3 71.3 Tax recoverable 2.6 0.4 Other investments 467.2 431.6 Cash 249.4 148.5 Non-current asset held for sale 34.0

Current liabilities 297.1 269.2 Short term borrowings 166.9 146.7 Payables 105.1 80.2 Taxation 25.1 42.3

Share capital 343.6 343.6 Retained earnings 1,304.0 985.3 Shareholders’ funds 1,647.6 1,328.9 Minority interests 41.9 13.6

Long term liabilities 156.5 141.1 Long term loans 127.4 132.4 Deferred tax liabilities 29.1 8.7

Total assets 2,143.1 1,752.8

11 Selangor Properties Berhad Valuation & Recommendation

Selangor Properties’ RNAV Land Book Book Market Market size cost value/ psf value psf value Property (sq ft) (RM mil) (RM) (RM) (RM mil) Damansara Heights SPB Towers, Jln Batai 130,631 10.8 82.7 500 65.3 Batai shops, Jln Batai 76,518 5.0 64.7 450 34.4 Kompleks Pejabat D’sara, Jln Dungun 171,163 26.5 154.7 450 77.0 Land, Pusat Bandar D’sara 862,488 96.6 112.0 500 431.2 Commercial & residential land 450,491 73.6 163.4 450 202.7 Wisma Damansara sale price (NLA: 269,535 sf) 120,355 56.0 465.1 to JV co 100.0 Wisma HELP (NLA: 92,183 sf) 49,880 36.0 721.7 450 (NLA) 41.5 Menara Milenium (NLA: 573,175sf) 163,568 182.9 1,118.1 550 (NLA) 315.2

Bukit Tunku & Central KL Taman Tunku flats 84,289 8.5 100.8 450 37.9 Bukt Tunku bungalow 11,162 0.4 35.8 450 5.0 Wenworth hotel, Jln Yew 56,954 16.4 288.5 450 25.6 Bukit Permata project, Batu Caves 63 acres 93.7 34.1 34.1 93.7 Selayang Mulia project, Selayang 66.8 acres 48.3 16.6 16.6 48.3 Ulu Langat land 139.5 acres 33.5 5.5 5.5 33.5 Claremont Shopping Centre, Perth 61.9 61.9 Coolum Lagoon Resort, Queensland 25.3 25.3 HELP International Corp 51% stake 67.9 Net cash & short-term securities 422.2 (as at Oct 2007) Total RNAV 2,088.9 No of shares (m) 343.6 RNAV per share (RM) 6.08 Fair value assuming 30% discount to RNAV (RM) 4.26 * Note: book values are based on Oct 2006 annual report

12 Selangor Properties Berhad Selprop’s asset valuation has earlier been understated for a very long time, as most of its properties were revalued in the 1980s. However, this is less the case now – although it is still undervalued – as latest accounting standards require an annual valuation of properties at their “fair values”, under FRS 140. The company revalued its properties upwards by RM294.9 million on 1 Nov 2006. This has been reflected in FY07, where shareholders’ funds increased from RM1.34 billion to RM1.69 billion, while NTA per share increased to RM4.79 from RM3.86. Between FY06 and FY07, the value of investment properties rose from RM297.2 million to RM553.2 million, while development land rose from RM470.4 million to RM508.5 million. However, as the 2007 annual report has yet to be issued, it is unclear which assets were revalued, and what their latest valuations are. We place Selprop’s RNAV at RM6.08 per share (see table above). This is based on RM500 psf for the soon to be developed Jalan Batai land, as well as the prominent Pusat Bandar Damansara land (excluding buildings), and RM450 psf for the other plots of land in Damansara Heights, Bukit Tunku, and Jalan Yew in Kuala Lumpur. We have valued the NLA of Menara Millenium at RM550 psf and Wisma HELP at RM450 psf, and the stake in HELP at the current market price of RM1.50 per share. Most of the other assets are kept at their respective Oct 2006 book values. By applying a 30% discount to RNAV, we arrive at a fair value of RM4.26 – 44% above the current share price. We like Selprop’s quality land bank and high asset values. While the property cycle may have peaked, its prime land bank should see continued demand. The high-end property market in the Damansara Heights / area is expected to remain due to underlying demand and limited supply, unlike the KLCC area, for instance. The proposed E&O joint venture and Batai condo projects could help re-rate the stock, with strong earnings likely to flow in for at least the next 3-4 years. Selprop may not be terribly exciting, but offers good value for longer-term investors. We rate the stock a BUY.

Per share data Year-end Oct 2006 2007 2008E 2009E 2010E EPS (sen) 25.5 23.5 20.7 26.9 27.6 P/E (x) 11.6 12.6 14.3 11.0 10.7

Dividend (sen) 10.0 10.0 10.0 10.0 10.0 Dividend yield (%) 3.4 3.4 3.4 3.4 3.4 Payout ratio (%) 39 31 48 37 36

NTA (RM) 3.86 4.79 4.90 5.07 5.24 P/ Book value (x) 0.76 0.62 0.60 0.58 0.56

Cash flow / share (sen) 28.6 27.1 24.5 30.7 31.3 P/ Cash flow (x) 10.3 10.9 12.1 9.6 9.4

Net gearing (%) net cash net cash net cash net cash net cash ROE (%) 6.6 4.9 4.2 5.3 5.3

13 Selangor Properties Berhad Earnings outlook

Earnings forecast Year-end Oct (RM mil) 2006 2007 2008E 2009E 2010E Revenue 181.1 198.6 252.8 296.1 309.6 Operating profit 36.8 27.9 27.0 82.8 84.9 Depreciation (8.7) (9.0) (9.0) (9.0) (9.0) Interest & other income (24.7) (13.7) 0.5 2.0 3.0 Pre-tax profit 134.5 106.4 101.5 128.5 131.6 Tax (44.9) (22.3) (26.4) (32.1) (32.9) MI (2.0) (3.5) (4.0) (4.0) (4.0) Net profit 87.6 80.7 71.1 92.4 94.7

Operating margin (%) 20.3 14.0 10.7 28.0 27.4 Pre-tax margin (%) 74.3 53.6 40.2 43.4 42.5 Net margin (%) 48.4 40.6 28.1 31.2 30.6 Effective tax rate (%) 33.4 20.9 26.0 25.0 25.0

Selprop’s net earnings have ranged between RM64.4 million and RM87.6 million over the past three years. In FY07, net profit declined from RM87.6 million to RM80.7 million, as profits from asset sales declined from an estimated RM95.1 million to RM49.7 million, and some provisions were made for currency losses. Profits have mainly been boosted by the property investment division, which accounts for between 76-92% of pre-tax profit. These are derived from rental income, asset sales and trading gains from its investment securities portfolio. Selprop’s earnings are highly reliant on asset sales, as well as investment gains from its investment portfolio. As such, earnings can be volatile. Nonetheless, investors have not historically valued the stock based on P/Es, but rather on underlying asset values. Gains from one-off asset sales alone, we estimate, contributed to 71% and 47% of profits in FY06 and FY07, respectively. Among its pool of sustainable income, its investment properties will provide sustainable annual rental income of RM36 million, while HELP is expected to rake in pre- tax profit of RM14.5 million and RM18.1 million in FY08-09. In FY08, the company will realize a RM30.3 million profit from the sale of Wisma Damansara. Apart from that, there are no other asset sales in the pipeline. With lower asset sales and investment gains assumed, we expect net profit of RM71.1 million for FY08, or 20.7 sen per share, down from RM80.7 million in FY07, with a P/E of 14.3 times. Earnings will accelerate in FY09, with the start of the Batai condos, which will bring in GDV of RM300 million and estimated pre-tax margins of 35-40% over FY09-11. We have not factored in the E&O joint venture development yet in our forecasts. For now, we expect net profit of RM92.4 million, or 26.9 sen per share, in FY09, placing its P/E ratio at 11 times.

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