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Saturday, November 15, 2008

UEM Land Holdings to make its debut on Bursa soon

Very few companies in corporate Malaysia have been reshaped, restructured and rebranded as many times as UEM Group. Since the Asian financial crisis in 1997/1998 when the group was reeling from massive debt, the sprawling diversified conglomerate (then called Renong Group) has been sliced and diced into various entities based on core activities.

Soon, another major restructuring will come to fruition. This time, it involves the restructuring of UEM World. The counter was suspended since late last month to make way for the debut of UEM Land Holdings Bhd on the main board of Bursa Malaysia. (UEM Land will take over the listing status of UEM World)

Earlier, UEM World had disposed of its entire shareholdings in four listed companies, namely UEM Builder Bhd, Pharmaniaga Bhd, Opus Group Bhd and Cement Industries Malaysia Bhd, to its shareholders as part of the restructuring plan. It subsequently reorganised its shareholdings in its wholly owned subsidiary, UEM Land Bhd, via a dividend-inspecie and capital repayment exercise. This involves the offering of five UEM Land Holdings shares for every four UEM World shares held and RM1.26 cash for each UEM World share held.

The restructuring of UEM World is primarily aimed at expanding the conglomerate’s real estate arm. And the incorporation of UEM Land Holdings in August 2008 as the flagship company for the real estate investment and development businesses of UEM Group and as the new parent company of UEM Land is geared towards that purpose. (UEM Group is a wholly owned subsidiary of Khazanah Nasional Bhd, which is the investment holding company of the Government.)

Wan Abdullah: Sales are slow but there are still buyers.

Post-listing, UEM Land Holdings will be 77.1%-owned by UEM Group and 22.9% by the public. On the public shareholding spread falling short of Bursa Malaysia’s requirement of 25%, UEM Land Holdings managing director Wan Abdullah Wan Ibrahim reveals that the company has been granted a time extension by the bourse to meet its requirement.

Valuable land bank

An analyst with a foreign research house views the restructuring of UEM World as a strategic move to generate investors’ interest. According to him, UEM Land appeals to investors because it owns a vast land bank in Iskandar Malaysia, which is one of the country’s economic growth corridors under the Ninth Malaysia Plan.

UEM Land currently owns about 40% of the total land area in Nusajaya. Spanning a total of 23,875 acres, Nusajaya has been identified as one of the five flagship economic zones in Iskandar Malaysia. It is currently under various stages of development to be transformed into an integrated township, with completion expected to be in 2030.

“Previously, the bulk of UEM World’s valuations were derived from UEM Land’s tract in Nusajaya,” the analyst explains, adding that investors who bought UEM World’s shares were actually capitalising on the potential appreciation of the land value.

However, he says that at this juncture it is hard to justify as to whether the indicated reference share price for UEM Land Holdings is a fair value. He attributes this to the concentration of UEM Land’s business activities in Nusajaya and the lack of historical earnings guidance for its projects there.

Although the prevailing poor market sentiment is likely to depress the reference share price of UEM Land Holdings further when it make its debut on the stock exchange next week, Wan Abdullah remains unfazed.

He is convinced that the potential income generated from UEM Land’s businesses in Nusajaya and the company’s upcoming projects in other growth areas will be the future determinant of the share value of UEM Land Holdings.

“We view our ongoing projects in Nusajaya as machinery to crank out sustainable revenue streams for the company,” says Wan Abdullah in an interview.

International relevance

UEM Land is the main developer of the township, given its large presence in Nusajaya. Among the projects under its belt are the Johor state new administrative centre, Puteri Harbour Waterfront Precinct and several high-end residential enclaves as well as commercial and industrial estates.

The Johor State New Administration Centre is one of UEM Land’s catalyst projects in Nusajaya.

According to Wan Abdullah, UEM Land will bank on the diversity of its product offerings at Nusajaya, which target various market segments, to deliver consistent sales in the challenging economic climate ahead.

“There is no doubt that buying activities are going to slow down and we are bracing ourselves for the challenges ahead. However, we believe there are still buyers, particularly from the affluent market, who would be interested in investing in our projects,” he says.

“We believe we could steer out of this turbulence with sweet success as we have a wide and diversified market from which to tap,” he adds.

Nusajaya’s strategic location close to Singapore and its easy access to various facilities, including two international airports and five seaports as well as a comprehensive network of roads and expressways, will add strength to the company’s projects.

Homes at East Ledang high-end residential precinct come with exclusive designs.

To date, UEM Land has recorded encouraging sales for its Nusajaya projects. For instance, its four high-end residential developments – namely Nusa Idaman, Horizon Hills, Ledang Heights and East Ledang – have recorded take-up rates of 59% to 84%.

Wan Abdullah says most of these buyers are foreign investors, with the bulk of them coming from Singapore. He adds that the company continues to see a growing interest among foreign investors, particularly from the Asia-Pacific and Middle East regions, for its projects, thanks to its aggressive international marketing.

Meanwhile, it is understood that the company’s appeal for the relaxation of the quotas imposed on foreign home ownership is still under consideration by the Johor government. Currently, the quotas for foreign home ownership are 20% for residential and 50% for resort-type projects.

Development progress intact

Wan Abdullah reveals that UEM Land’s projects are proceeding as planned despite the worsening financial crisis over the past few months threatening to lead to a global recession. He says the company is now at the final stage of negotiations with a consortium of local bankers for the financing of its projects in Nusajaya.

UEM Land also seeks to form more strategic partnerships to increase the development pace in Nusajaya. The company already has partnerships with two Middle East property developers – Limitless Holdings Pte Ltd and DAMAC Group – and three local players – Crescendo Corp Bhd, Gamuda Bhd and United Malayan Land Bhd – for its various projects in Nusajaya.

Wan Abdullah says the company’s strategic partners were selected based on several criteria established by its board. This includes having a wide market outreach and possessing the technical and financial capabilities for real estate developments.

Going forward, UEM Land will diversify its business with development projects in other growth areas such as the Klang Valley and Penang. According to Wan Abdullah, the company is also exploring other options to grow its business and that includes acquisitions of strategic buildings for leasing purposes and REITs.

On the company’s plan to expand overseas, Wan Abdullah says the management has adopted a cautious stance because “the current climate is not looking good”. He says the company does not have the capacity currently to expand overseas but it will look into such a possibility probably two years down the road when the economy improves.

By The Star (by Celilia Kok)

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