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Friday, February 15, 2008

UEM Land’s profit catalyst

Nusajaya to help it post record sales and profit by 2012

: UEM Land Sdn Bhd expects record sales and profit by 2012 when development of its Bandar Nusajaya in the Iskandar Development Region (IDR) picks up momentum.

Managing director Wan Abdullah Wan Ibrahim said the development of Nusajaya should reach its “tipping” point by 2011 as new activities and projects were being launched.

Targeted for completion in 30 years, Nusajaya is expected to incur a total gross development cost of RM55bil.

UEM Land is currently working on 11,000 acres in Nusajaya.

The sale of 4,500 acres to Khazanah in 2006–2007 for RM1.9bil has reduced the company's gearing to 0.48 time from 17.38 times before.

Upon completion, Nusajaya will have 100,000 homes and a population of 500,000. Besides the residential component, the other growth catalysts for Nusajaya include a theme international resort, education city (EduCity), medical city (MediCity), waterfront development, Johor's new administrative centre and the Southern and Industrial Logistics Centre, an industrial estate development.

Analysts said the expected consolidation of UEM Land's parent, UEM World Bhd, would raise the profile and financial capability of UEM Land to actively promote its Nusajaya development.

UEM World is expected to announce today a major corporate exercise that could involve the streamlining of the group's business structure.

“The proposed consolidation of UEM World will make it a more focused group in the property business. It will be able to leverage and take advantage of its huge land ownership in the IDR,” an analyst at a local brokerage said.

Wan Abdullah said the company needed to establish considerable level of activities and critical mass to ensure Nusajaya's success in a shorter time.

“Going by its normal pace, the development will take about 180 years but we are fast tracking it by working with strategic partners who are competent in their areas of expertise,” he told StarBiz recently.

So far, the development of Nusajaya is progressing steadily with 11,000 homes completed by various developers and delivered to buyers.

The value of the units sold by UEM Land last year rose to RM485mil compared with RM80mil in 2006.

The sales value does not include other contributors to revenue, such as sale of land during the de-gearing exercise, revenue from construction of the new administrative centre and other strategic land sale to joint-venture partners.

By April, Johor's administration will be moving to Nusajaya. To date, 95% of the Mentri Besar's office and the state legislative assembly office have been completed.

UEM Land is negotiating to build the Federal administrative complex, which will be under the build, lease and transfer model.

According to Wan Abdullah, many developers are vying to participate in the development of Nusajaya and that the company would be selective and only team up with those that could add value to the development.

“The partners must have the right technical expertise, financial strength and marketing network to add value and contribute positively to the development of the sprawling township,'' he said.

UEM Land has tied up with a few partners, including Gamuda Bhd to undertake the development of Horizon Hills and with Limitless LLC, a unit of Dubai World, to build 900 waterfront homes in Puteri Harbour.

The 1,200-acre Horizon Hills resort development is a 50:50 joint venture between UEM Land and Gamuda.

Since the first product was launched in March last year, sales have to date reached RM350mil.

In December, the company signed a 40:60 joint venture with Limitless.

“We are looking at working with more competent partners to offer more quality property products as we are targeting the regional market,” Wan Abdullah said.

By The Star (by Angie Ng)

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