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KSL Holdings - An Under-Invested Johor Property Play
Publish date: Wed, 24 Sep 2025, 10:49 AM
MYR4.50 FV reflects 40% discount to RNAV. KSL is an almost-pure Johor property play that is set to benefit from: i) SGD-driven retail spending, and ii) the pick-up in economic activities driven by the Johor-Singapore Special Economic Zone (JS-SEZ). Although the market has turned bullish on the Iskandar Malaysia property market since 2H23, the stock is under-invested - which should change when management meets more investors ahead.
Almost a pure Johor property play. KSL has 4,946 acres of land, of which 4,586 acres (or 93%) are located in Johor. 53% of the total landbank (2,635 acres) is in prime Iskandar Malaysia areas. The remaining land is in Klang and Setia Alam, in Selangor. The company also owns a few investment properties including KSL City Mall (NLA: 450k sqf) and KSL Esplanade Mall (NLA: 650k sqf), as well as three hotels. The investment property segment contributes almost 20% of total revenue.
Property sales picked up significantly post COVID-19. In line with the industry trend, KSL's property sales rose substantially from <MYR1bn before the pandemic to MYR1.4bn in FY24, and management has set a MYR1.2bn target for FY25, given the timing of launches. Apart from the pent-up demand for housing, SGD-driven spending has significantly benefited KSL City Mall which is located in the city centre and mainly houses businesses that provide affordably-priced services (beauty salons, massage centres) and a grocer. The mall's current average rental rate of MYR23psf is significantly higher than that of other malls in the vicinity.
Higher-than-industry-average profit margins. KSL's EBIT margin of 35-40% (ex-pandemic years) for the property development division is significantly higher than the industry average. This is largely attributed to its low land costs, maximisation of land efficiency, product pricing and in-house construction arm. Management has also opportunistically acquired a few parcels of land during the pandemic, and from a few distressed land owners over the last few years.
Stronger upside from property investments. Earnings contributions from the retail malls should strengthen from FY26 onwards. The lease for one of the anchor tenants (Lotus's) in KSL City Mall is expiring in early 2026, and its renewal should lead to a substantial increase in rental revenue. Lotus's will also be occupying space in KSL Esplanade Mall to replace the existing grocer there, which should help to attract more shoppers and retail tenants.
Valuation. Our indicative FV of MYR4.50 is based on a 40% discount to RNAV. Although this is above 1x P/NTA (the stock's NTA is MYR4.17), KSL's low land costs, above-industry profit margins and ROEs, and valuation upside for KSL City Mall should justify our valuation for the stock.
