KIM ENG RESEARCH, Jan 3

Malaysian-listed company Landmarks Bhd plans to sell its crown jewel asset, the Sungei Wang Plaza mall, as it seeks to pursue a RM4 billion (S$1.7 billion) tourism project on Indonesia's Bintan island. Landmarks plans to buy a 64.5 per cent stake in Bintan Treasure Bay Pte Ltd (BTB) for RM355 million. BTB owns 343 ha on the island, which we believe it had purchased from Gallant Venture in July 2006 for $34 million.

Conceptually, Bintan Treasure Bay has been designed to capitalise on the anticipated increase in tourist arrivals and rising affluence in the region, and be developed as the 'Water Resort City' of Bintan, with canals, waterways and lakes. It is expected to target the middle and upper segments of tourists and investors, particularly Indonesians and Singaporeans.

According to the press, Landmarks plans to build a lifestyle hotel and resort, as well as residential and commercial developments on the land. These will comprise about 13 lots of estate island villas; 745 units of luxury island and deluxe villas with berthing facilities; 1,700 units of marina and hillside condominiums; commercial shop lots; a six-star resort and wellness centre; and four hotel and resort reserved lots.

These properties have a preliminary estimated gross development value of about $1.77 billion, with the entire project expected to cost about $921 million. The proposed acquisition is expected to be completed by the first quarter of 2007.

This development is proof of substantial progress being made in Gallant Venture's efforts to develop its Bintan Resorts land into a vibrant and attractive tourist destination. We remain fully confident of the long-term growth potential of Gallant, based on the ongoing developments such as Bintan Treasure Bay, Lagoi Bay and subsequent land parcels, as well as cashflows from industrial parks, resort operations and utilities.

We are reviewing our target price as we get further clarification from the management. However, we still conservatively calculate the potential value of its total landbank and cashflows to be worth $1.80 per share (in present value) when fully developed. We maintain our 'buy' recommendation on Gallant Venture.

BUY