OSK’s latest land deal expected to improve earnings

PETALING JAYA: OSK Holdings Bhd’s recent land purchase could add RM18.4mil in annual earnings translating into 59 sen earnings per share over financial years 2028 (FY28) to FY31.

Hong Leong Bank Investment Research (HLIB Research) based this on profit before tax of 20%.

It has maintained the company’s earnings forecast and “buy” rating with a target price of RM2.13 a share based on a 20% discount to its sum of parts-derived valuation of RM2.66 a share.

HLIB Research said OSK offers a compelling multi-engine growth story, anchored by its fast-growing private credit business and expanding cable division, which rides on rising demand from utilities, renewable energy players, and mission-critical infrastructure.

Despite these strong growth drivers, the stock trades at an undemanding 7.4 times/seven times/6.2 times respectively for FY25 to FY27 price-to-earnings ratio, leaving ample room for re-rating.

OSK announced the proposed acquisition of a 3.3-acre freehold land parcel in Subang Jaya, Selangor for RM44mil on Tuesday.

The site has been earmarked for the development of serviced apartments with an estimated gross development value (GDV) of RM427mil.

Additionally, the Subang Jaya acquisition marks OSK’s second land deal in 2025, following its Rawang purchase earlier in the month.

Year-to-date, the company has replenished a total of 17.8 acres of land, carrying a combined GDV of RM1.69bil.

This brings OSK’s overall landbank to 2,493 acres with an estimated total GDV of RM20.2bil.

Both acquisitions reinforce and expand OSK’s presence in the Klang Valley.

Furthermore, the recent purchase consideration translates into a land cost-to-GDV ratio of 10.3%, which HLIB Research views as attractive, positioning it at the lower end of the typical 10% to 20% range for urban land acquisitions.

Such a relatively low entry cost provides OSK with ample headroom to sustain healthy development margins while also offering a meaningful buffer against potential construction cost volatility.

The project, which has been targeted for launch two years from the acquisition completion in the first quarter ending March 31, 2026, would see a pricing level of above RM700 per sq ft and would be broadly in line with prevailing asking prices of nearby Amika Residences.

The sales performance of Avaland’s recent launches within Tropicana Metropark, notably the 95% take-up at Alira Residences and the rapid 60% absorption for Amika Residences within two months, underscores the presence of a ready and resilient market.

Additionally, this track record suggests healthy demand for new residential products in the township, thereby mitigating market risk for OSK’s upcoming development.