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Saturday, December 8, 2007

A bold successful move

YNH's early decision to buy up property pays off

Four years ago, when it was listed on the main board of Bursa Malaysia, YNH Property Bhd made a conscious decision to reposition itself as a leading high-end property developer in the Klang Valley. At that time, the shift into high end properties in prime locations seemed like a bold move considering the fact that the group has been involved in affordable housing scheme for over 20 years in Manjung, Perak.

To realise the aspiration, the group acquired prime land in Kuala Lumpur. The timing was also key as there was generally the perception that the soft property market situation in 2003 was coming to an end, and there would be an upswing soon in demand for properties on prime locations, says group corporate services head Daniel Chan.

As a result, the group ended up with 38-acres of prime location land in Kuala Lumpur city.

YNH corporate services head Daniel Chan with the Forbes Asia Best under A Billion award showing the 163 service suite model at KL

The decision to move into Kuala Lumpur's hot spots was indeed, as it turns out, a right one.

“For example, Menara YNH, one of the group's projects planned for 2008 in Kuala Lumpur on a 3-acre site, has already attracted much attention from internationally reputable developers who want to jointly develop the project with us.

The 45-storey iconic building, with a gross development value of RM1.2bil, is designed to accommodate a single office block and a retail centre. Each floor has a floor plate of 55,000 sq ft, which is one of the largest in the world. The total net lettable area of approximately 1.2 million sq ft is also one of the largest in Malaysia, he says.

Chan adds that YNH is now considering offers from reputable investors from Hong Kong, Singapore and New York to jointly develop Menara YNH.

The company has also received offers to purchase the Menara YNH en-bloc from interested parties from Singapore and Middle East.

The rapid appreciation of land value in Kuala Lumpur has evidently justified the group's decision to enter into property development in Kuala Lumpur, Chan added.

“In Kuala Lumpur city, the per sq ft of undeveloped land is now RM1,500, compared to about RM500 psf when we first bought it.

“For developed commercial properties, such as office buildings, the value is now above RM1,100 psf, compared to RM600 psf in 2003.

“This can be seen in the latest transaction for Glomac Tower located in Kuala Lumpur City Centre (KLCC), which was sold for RM1,120 psf.

YNH has lined up 10 projects of high-end and affordable residential and commercial properties with an estimated gross development value of over RM6bil for launch over the next five years in Kuala Lumpur and Manjung, Perak.

There are 9 projects planned for Kuala Lumpur that would be implemented between 2008 and 2013, while in Manjung the group would launch a mixed development project with an estimated gross development value of RM2.3bil project that would take about 20 years to complete.

“The group would carry out the development of the 9 projects at the 38-acre of land bank spread over in Kuala Lumpur city and Mont Kiara.

“The projects in Kuala Lumpur city and Mont Kiara that would be developed next year are the RM1.2bil Menara YNH at Jalan Sultan Ismail, while the RM700mil D'Kiara Place and RM300mil Project 6 Duta are planned in Mont Kiara.

“There are 6 other projects, comprising retail commercial properties and luxurious condominiums, with an estimated total gross development value of RM1bil, which will be developed in Mont Kiara between 2009 and 2013,” he says.

On the group's on-going projects in Kuala Lumpur city and Mont Kiara, Chan says the RM300mil 163 Service Suites and the RM200mil Ceriaan Kiara luxurious condominium project would be completed respectively in 2008 and 2009.

“In September 2007, we managed to get Fraser Hospitality Pte Ltd to manage the 163 Service Suites, which comprises high-end service apartments, offices, and retail outlets.

“The project is 97% sold. The Ceriaan Kiara project, comprising two blocks of condominiums, in Mont Kiara is over 80% sold. In October 2007, CIMB-Mapletree has signed with us to purchase from us one block of the project,” he says.

In Manjung, the project planned for next year would be developed on a 1,000-acre site.

Menara YNH at Jalan Sultan Ismail,the artist impression

Chan says YNH had bought the 1,000-acre land more than 10 years ago and plans to develop 20,000 units of residential and commercial properties over the next 20 years.

Some 90% of the development would be residential components, comprising terraced and semi-detached houses, while the remaining 10% would consist of shop-houses. Each year, YNH will launch 500 houses on a 50-acre site for the next 20 years, which is expected to generate about RM75mil in revenue for the group annually,” he says.

Chan says the project was strategically located next to the Lumut Naval Base and Lumut Port Industrial Park.

“Our research team has checked out that there is still a lot of demand for affordable housing in Manjung due to the presence of the Lumut Naval Base and the Lumut Port Industrial Park.

“There are also several oil and gas and bio-diesel companies presently in Manjung expanding their operations, which is currently driving the demand for affordable housing,” he says.

On the group's future business directions, Chan says YNH would continue acquiring land only in strategic locations.

“The group will concentrate on looking for land in Manjung, and selective parts of Klang Valley and Ipoh,” he says.

Chan says because the group had purchased its land bank in Kuala Lumpur at very attractive pricing, the rise of building materials' prices of late did not eat into the profit margins of the group.

“We can still manage a good profit margin of between 40% and 50% despite the increase in the raw materials' prices,” he says.

The YNH Property group is owned by the Yu family in Sitiawan, Perak.

The group has to date completed and sold more than 8,800 units of residential and commercial properties with an estimated gross development value of RM820mil in Perak since 1982.

YNH was also the recent recipient of the Forbes Asia 'best under a billion' award in recognition of its performance one of the region's top 200 small and medium size companies.

Two recent analyst reports published in November 2007 have recently revised their forecast earnings for YNH Property Bhd.

The reports from KAF-Seagroatt & Campbell Securities says it was revising the earnings for the 2007 and 2009 fiscal years by between 2% and 5% in view of higher margins for its high-end projects in Kuala Lumpur.

RHB Research Institute Sdn Bhd is also bullish on the group's capability to achieve higher earnings for the period 2007 to 2009.

It says the higher margins would also be influenced by the group's new projects such as the D'Kiara Place, Project 6 Duta, and better selling price for the existing projects such as the Ceriaan Kiara condominium project and 163 Service Suites.

KAF-Seagroatt also expects the shortage of premier commercial buildings in Kuala Lumpur CityCentre (KLCC) to boost the selling price of Menara YNH.

By The Star

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