BUY: Tebrau Teguh Bullish Breakout

Tebrau made a strong bullish breakout from a falling channel which in some ways also resembles a flag pattern. A breakout from either is a bullish sign. Volume is high, prices remain above the 10, 21, 30 & 50-day moving averages, RSI is positive & rising with some way to go & daily MACD is positive. Hence technically Tebrau rates a strong buy at current prices. The recent high is 0.455, but based on recent lows of 0.15 before this rise & a flag pattern breakout, the target price is 0.65 which gives a 50% return, though it has potential to go much higher especially if its landbank is revalued.

Recently Tebrau has been in the news because of the South Johor Development Plan. It has 1,012 acres of prime development land close to Johor Bahru & the Causeway. The book value of its land is just 13.40 per sq ft. However, land around the area has been sold at RM 110 psf, hence the valuation should be much higher.

A possible revaluation is as follows: Land of 1,012 acres = 44,022,000 sq ft x RM110 psf = RM4,842,420,000 (thats RM 4.8 bil). If we take just 50% of value, thats RM2.4 bil. Divided by 670 mil Tebrau shares = NTA RM 3.58 per share.

Even if this may be the long term value of the land, it would appear that Tebrau shares are undervalued. If thats the case it has far more upside than downside and is quite cheap at 41 sen.

It is virtually debt free and is 42% owned by Kumpulan Prasarana & Rakyat Johor (Johor state govt.)

Fundamentally and technically it rates a strong buy.