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Thursday, February 28, 2008

Promising yet cautious property market for 2008

KUALA LUMPUR: The outlook for the property market this year is expected to remain promising yet cautious due rising oil prices, the possible increase of inflation rates and growing concerns in financial markets worldwide.

“The government’s move to allow EPF contributors to make monthly withdrawals from the balance in Account 2 for the financing of one house (effective 1 Jan, 2008) as well as the establishment of one-stop-centres (OSC) are expected to give a positive effect,” said Datuk Abdullah Thalith Md Thani, directorgeneral of the Valuation and Property Services Department, Ministry of Finance.

Abdullah was presenting an overview of the Malaysian property market at the 1st Malaysian Property Summit 2008 organised by the Association of Valuers & Property Consultants in Private Practice Malaysia (PEPS) yesterday.

Other topics presented at the conference included the performance of Malaysian real estate investment trusts (REITS) and the high-end condominium market for 2007 and their outlook for 2008.

On Malaysian REITS, chartered surveyor Datuk Mani Usilappan said the market is expected to be aggressive in acquisitions this year, with additional injections of assets.

“Aside from this, some REITs have review of rents coming up this year and next year. So these REITs are expected to perform better,” he said. There are 13 REITs with a total capitalisation of RM6.5 billion as of 31 Dec, last year.

Where high-end condominiums were concerned, Knight Frank Malaysia’s managing director Eric Ooi (pix) said the completion for high-end condos in Kuala Lumpur is expected to be higher this year.

“Last year, there were 1,400 newly completed high-end condominiums and the expected completion this year is 4,370 — more than half are located in KL city. We are also expecting branded residences such as Four Seasons Place, St Regis Residences and The Binjai to set a new benchmark in pricing of RM2,000 to RM3,000 per sq ft,” Ooi said. Last year, high-end condos within the Kuala Lumpur City Centre were selling for RM1,300 to RM2,000 per sq ft.

The rental market is also expected to be competitive this year due to the higher completion of units. Rentals may increase but there would be yield compression, as the increase in prices is faster and higher than the rental increase.

“We have seen very strong foreign interest to buy properties in Malaysia, about 40% to 50% are foreign purchasers, and we expect this percentage to remain this year,” Ooi said, adding that buyers from the UK, Australia and Europe found the property prices here to be very affordable.

Ooi explained that there might be concerns of oversupply in high-end condos but it would depend on two segments – whether it is for investment purposes or owner occupation. He said there is still demand for high-end condos and among some of the key demand drivers are competitive pricing, location, quality and lifestyle.

By theSun (by Rosalynn Poh)

SP Setia sets five-year plan

KUALA LUMPUR: Renowned developer SP Setia Bhd unveiled a five-year plan with a theme “Move to Change” to firmly position itself locally and abroad. Group managing director Tan Sri Liew Kee Sin (pix) said the plan was mooted to strengthen the SP Setia brand name and move the company aggresively in the highend property market segment.

Speaking to the media after the company’s 33rd AGM at the Kuala Lumpur Golf and Country Club yesterday, Liew said the company is also geared to achieve record sales revenue of RM1.8 billion from new and existing projects this year.

“SP Setia is currently well known for its Setia Homes brand comprising terraced houses that make up 80% of our products, but by 2012, we wish to reduce it to 30% and concentrate fully on making the ‘SP Setia Eco’ brand the main driver of the company,” said Liew. Future projects are expected to be modelled after SP Setia’s award winning brand of Eco-themed developments (Eco is Setia’s corporate acronym for “environment”, “community” and “organisation”).

“We are going to concentrate on integrated development, overseas markets, bungalows and high-rise condominiums in an effort to push the Setia Eco brand,” Liew added.

He said the five-year plan also aims to make SP Setia’s international operations as big as the company’s local operations.

“We are going on an aggressive overseas expansion drive starting in Vietnam. We are also looking at other countries such as Pakistan, Cambodia, India and China, but it depends if we can get the right land at the right price.

“Although we are going out aggressively in Vietnam with our EcoLakes in MyPhuoc project, we make sure we carry out a detailed study on each piece of land before we make a purchase.

“When we went there first [Vietnam], we thought we could build a few hundred houses. But after seeing the market there, we think we should build a few thousand houses now,” said Liew.
According to him, the group is also looking for the right land at the right price in Vietnam and have scheduled projects with a gross development value of more than RM300 million there.

On another note, Liew said rising construction costs are a “headache” but the company is well prepared to face it. “We sell our products at a premium price, 20% higher than our competitors but our buyers are willing to pay the price because they know our brand name. For now, we are concentrating on higher margins, which translate to higher profits,” he said.

Liew described the financial year ended 31 Oct, 2007, as a great year. The group recorded a total sales volume of RM1.2 billion on the back of RM1.1 billion in revenue. Group profit after tax was at an all time high of RM260 million.

SP Setia has a strong local presence in the Klang Valley, Johor and Penang. It is well known for its Setia Eco Park Shah Alam, Setia Eco Gardens and Setia Tropika developments in Johor. It has a current landbank of 4,817 acres and aims to launch a RM1 billion project in Sabah within the next three to six months.

By theSun (by Tim Leonard)

SP Setia to widen revenue base

It targets commercial property, overseas projects

KUALA LUMPUR: SP Setia Bhd, which is developing townships and niche projects in the Klang Valley, Penang and Johor, is aiming for a broader revenue contribution base by 2012.

Group managing director and chief executive officer Tan Sri Liew Kee Sin said the company was targeting a larger contribution from integrated commercial property projects within matured townships, high-end condominiums and overseas property projects in five years.

Tan Sri Liew Kee Sin (right) and company directors at the AGM

“We’re moving away from the traditional market segment of link homes as there won’t be much growth if we just continue developing them,” he said after the company AGM yesterday.

Liew said 80% of revenue in the last financial year was contributed by this segment.

There would be more launches of “Eco” brand residential properties, high-end condominiums as well as integrated commercial properties, he added. The “Eco” brand is SP Setia’s high-end brand.

“We’re aiming for sales of RM1.8bil for the financial year ending Oct 31 (FY08), of which RM1.5bil will be in Malaysia and the remainder in Vietnam,” Liew said, adding that sales would be RM600mil higher than FY07.

SP Setia entered the regional property development scene last year when it signed a joint-venture agreement with Becamex IDC Corp of Vietnam to develop a mixed development project in My Phuoc. A second joint-venture agreement was signed recently with Saigon Hi-Tech Park Development Co for a mixed development project.

Liew said the first phase of the RM2.1bil EcoLakes project at My Phuoc to be launched in April or May, would comprise three-storey link homes.

“Property development in Vietnam will only grow over time; we may launch our other project there next year,” he said. Both projects are located near Ho Chi Minh City.

Liew said there were no plans as yet to scout for property projects in Hanoi. “We’ll invest in Hanoi only when we find a location where we’re able to implement our development concept and where the joint-venture partner sees value in having us on board.”

Apart from the Vietnam launch, Liew said the RM1bil Aeropod @ Tanjung Aru, near Kota Kinabalu, would be launched in six months after the finalisation of the development plans.

Other launches for the year include Duta Grande in June or July, comprising 15 bungalows priced at RM30mil each, and Setia Sky Residences, a RM700mil condominium project located near the National Heart Institute in downtown Kuala Lumpur that will be priced at an indicative RM750 psf.

For FY07, the company posted a net profit of RM260mil on revenue of RM1.15bil.

By The Star

Gamuda starts working on succession plan

KUALA LUMPUR: Gamuda Bhd managing director Datuk Lin Yun Ling said the group has started working on a succession plan while he would continue to helm the company he founded.

Describing Gamuda’s prospects as “good”, Lin is confident the group would be able to meet all “the guidance that it had given to analysts earlier”.

He denied market talk that his share sale was due to any adverse changes on the group’s fundamentals or earnings prospects.

“I brought up the company over the past 25 years. I certainly don’t intend to have an abrupt exit ... we will ensure that over the next five years or longer, there will be a smooth transition,” Lin told StarBiz yesterday.

He said he could foresee the day Gamuda would be run by professional managers who were not shareholders.

“There are two or three names who have the potential (to take over the top executive positions),” he added.

Lin trimmed his stake to 1.7% from 5.2% last week. The shares were placed out to global institutional investors.

The share sale sparked heavy sell down on Gamuda shares amid worries that the group’s prospects would not be as rosy if Lin exited. HLG Securities anlayst Teoh Paul Keng noted that the rate Gamuda replenished its order book had decelerated. “The group has not secured anything substantial besides the double tracking project,” he said.

The group’s order book ballooned to RM11bil after it bagged the double tracking project together with MMC Corp Bhd.

The share price tumbled to a low of RM3.20 – down nearly 40% from its recent high of RM5.30. It closed at RM3.92, up six sen yesterday.

“I didn’t expect the (market) reaction to be so strong,” Lin said.

Lin noted it was “unfortunate” that investors perceived the “18-month lock-in period” for his remaining stake as a sign that he would only stay on for that period.

He pointed out that this was the fourth time he sold down his stake in Gamuda.

“Over the last 16 years, it (the selling down) hasn’t affected my commitment to grow the company and make it a success,” he said.

Lin stressed he had never been the controlling shareholder. He was holding about 16% stake when Gamuda floated its shares on Bursa Malaysia.

“There are lots of rumours flying around, such as our Vietnam project is not doing well and I have health problems.

“My plan to sell shares has nothing to do with what is being speculated. It is mainly for estate planning purposes,” said Lin, adding that the share sale was to diversify his personal wealth.

“But I suppose for the investors, there is never (a good) time for the CEO to sell shares,” he quipped.

Lin refuted market talk that he sold shares because Gamuda was under pressure from the Malay Chamber of Commerce in terms of distributing 30% of the sub-contracts to bumiputra contractors. “That issue has been resolved to our (Gamuda’s) satisfaction,” he said.

On the outlook of the construction sector, Lin said it would still be “quite good” for the next few years and there was no sign of a downturn.

But in terms of the number of jobs being dished out, Lin opined it would be the same as in the past two years.

“The slowdown in the US would trigger the need for the Government to pump prime (the economy) a bit more.

“You will have some big ticket items to be rolled out from the development of the economic corridors,” he added.

By The Star - StarBiz (by Kathy Fong)

Tesco to invest RM800m in 11 new stores

BRITISH retailer Tesco Stores (M) Sdn Bhd will invest RM800 million within the next 12 months as it opens 11 stores, bringing the total number of Tesco stores to 31 and possibly over RM3 billion in sales.

The planned expansion, growth in like-for-like sales coupled with a strong consumer friendly pricing policy, is expected to help sales for the year ending February 28 2009 grow by not less than 30 per cent.

"We are currently constructing eight stores and we have plans to develop a further three stores, hopefully within the next 12 months. We are also building a second distribution centre for our ambient products," chief executive officer Chris Bush said.

Bush said Tesco's growth in Malaysia, in terms of expansion and sales, is one of the biggest markets outside of the UK.

"We ended 2006/2007 (February 2007) with RM1.7 billion in sales. In the current year (ending February 29 2008) we expect it to be significant, at around 50 per cent ... and we will be disappointed if we do not grow by at least 30 per cent in the coming year (ending February 2009)," he said.

Tesco, which opened its first Malaysian hypermarket in 2002, will also post its maiden profit in the current year ending February 2008.

Apart from the RM800 million investment, another RM100 million will be for the opening of a distribution centre. The investments will come from its 15-year-tenure RM3.5 billion bond sale.

"RM100 million will be for the distribution centre to be located in Bukit Beruntung," Bush said.

Two of the scheduled 11 stores - in Johor Baru and Prai - are Makro outlets which are being renovated and converted into Tesco Extra outlets.

New outlets are also scheduled for Mergong, Kedah, Kampar and South Ipoh in Perak, Desa Tebrau and Setia Alam in Johor and Semenyih in Selangor.

Bush, who was speaking to reporters yesterday to announce Tesco's price commitment for the next 12 months, said it has slashed RM20 million off the price of 500 products. The price cuts range from 5-41 per cent.

Tesco, which initiated two other price cuts in 2006 and 2007, investing RM6 million and RM15 million respectively, is this time taking its pledge a little further.

It announced that 50 basic everyday staples, which are its best-selling lines across fresh and grocery including oil, sugar, flour and rice will not be beaten on price.

Tesco will refund twice the difference if any of the 50 products is found to be cheaper elsewhere.

Tesco in Malaysia, a 70-30 joint venture between Tesco Plc and Sime Darby Bhd, employs 7,000 people at its 20 outlets and is set to employ another 5,200 people in the next year as its expands.

Going forward, Bush expects Tesco to invest a further RM500 million to RM600 million for openings in the 2009/2010 financial year.

By New Straits Times (by Vasantha Ganesan)

Cepco eyeing RM200mil job for Penang Bridge

KUALA LUMPUR: Concrete Engineering Products Bhd (Cepco) is confident of securing a contract worth about RM200mil to supply marine piles for the second Penang bridge project.

Cepco’s marine piles were successfully tested for the bridge project in July 2007, managing director Leong Kway Wah said.

“However, there is no indication yet. We have yet to hear if we are going to get the contract,” he said after the company AGM yesterday.

He added that Cepco was also eyeing jobs from projects to be rolled out under the Ninth Malaysia Plan and the various economic development corridors.

Leong was positive on the prospects for Cepco as the company was one of two players in the spun concrete piles market.

Cepco currently has an order book of about RM80mil that would keep the company busy for five to six months.

On new export markets, Leong said the company was in talks with parties in Canada.

“We have received enquiries from Canada on supplying materials for the construction of an indoor stadium for the 2010 Winter Olympics,” he said.

He said the award of the contract would be confirmed by the end of this month.

At present, the company already exports concrete piles to Iran.

“Currently, we have an existing order to supply marine piles worth RM15mil for an ongoing project in Iran,” he said.

Leong said revenue contribution from exports contributed 15% to total group revenue.

“We would like to increase our export market share but have to consider the problem of logistics especially with the increase in the price of fuel, which has impacted transportation cost,” he said.

On the rising price of raw materials like steel and cement, Leong said that this would affect the company’s bottom line as the company was not able to transfer the cost to customers fast enough.

He said Cepco’s strategy would be to anticipate the higher prices and factor them into its prices as well as to source for cheaper raw materials from external suppliers.

By The Star