21st January 2012, www.island.lk
John Keells Holdings (JKH) is currently planning a mega development encompassing land at its Glennie Street headquarters as well as adjoining Ceylon Cold Stores property, a research report from IIFL Institutional Equities said.
"JKH is currently exploring possibilities of a mega integrated development at an estimated US$ 750 million on its Glennie Street headquarters land," the report said.
It went on to say that this project would comprise two five-star hotels, malls, residential towers, conference centers and office complex spanning over an estimated 3.8 million sq. ft.
"The group’s vast real estate portfolio with large contiguous blocks of land in the heart of Colombo provides an ideal opportunity for such projects," the report said.
JKH itself was tight lipped about its plans on this mega development with senior company officials merely saying that they are examining various possibilities and working in parallel on matters including designs, approvals and numerous other formalities that must precede a development of this nature.
"The intention is there but delivery is another matter," a senior company official said yesterday. "We are making no formal announcement until everything is in place and we will do so when we are in a position to definitely state that we will go ahead with such a project," he explained.
The company declined to place any timeframe for the commencement and completion of the project if it takes off.
The IIFL report says that JKH is "the largest non-government land owner in Colombo" with 25 acres of Colombo land at prime locations in the city.
A significant portion of this city land portfolio is currently unutilized and presents immense potential for unlocking value, it said.
It noted that Shangri-La recently set a new benchmark for property prices in Colombo paying US$ 125 million for 10 acres at Galle Face and at that benchmark, JKH’s Colombo land value will almost equal a fourth of the conglomerate’s current market capitalization.
The report further noted that JKH also has 120 acres outside Colombo excluding hotel lands and these can be utilized to develop further leisure assets.
Although the JKH share has been falling in recent weeks and closed at Rs. 163.30 on Friday. The IIFL report gives a strong ‘buy’ recommendation on the counter saying that "the stock offers 39% upside" in a 12-month horizon. It has placed a target price of Rs.239 for the share one year down the road.
The report says that JKH is an "ideal play" for Sri Lanka’s economic revival given its presence in port operations, leisure, consumer food and retail and property.
"A track record of competent management and a strong balance sheet would help JKH sustain and strengthen its leadership position across sectors,’’ the report said noting that it was the largest and among the most liquid stock quoted on the Colombo Stock Exchange.
It also said that JKH has a cash chest of Rs.53 million "to exploit emerging opportunities."
John Keells Holdings - the Big Picture : IIIFL Institutional Equities
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