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Wednesday, July 2, 2008

Vietnam project set to boost BLand property division

An artist's impression of the Vietnam International University Township

HO CHI MINH CITY: Berjaya Land Bhd (BLand) expects its property segment to contribute up to 50% of total earnings in about four years.

This will be backed by its largest overseas project, the US$7.5bil Vietnam International University Township (VIUT).

Chief executive officer Datuk Francis Ng said the company’s largest contributor currently was its gaming sector while the property segment contributed less than 20% to total earnings.

BLand’s wholly-owned subsidiary Berjaya Leisure (Cayman) Ltd yesterday received the investment certificate from the licensing authority in Vietnam for VIUT, which is expected to be completed in eight to 10 years.

The project will be fully developed and managed by Berjaya VIUT Ltd, a newly-incorporated wholly-owned subsidiary of Berjaya Leisure (Cayman).

“With this project, we see enhanced earnings from property (operations),” Ng told reporters at the investment certificate award ceremony yesterday.

The project’s gross development cost was about US$5.9bil while its gross development value (GDV) stood at around US$7.5bil, he said.

“Four to five months ago, the expected cost was US$3.5bil but with escalating prices of materials and oil, we had to revise the figures”, he said, adding that further revision (of costs and GDV) was expected.

The entire project would be financed via internal funds, Ng said. “Initial capital cost will be minimal.”

As at April 30, BLand’s cash and cash equivalents stood at about RM687.5mil.

Ng said the company expected to receive approvals from the relevant authorities to start construction of VIUT in four to six weeks.

“Phase 1 should start in about three months,” he said, adding that there were seven phases in total.

Located in Hoc Man district, about 20km from downtown Ho Chi Minh City, the project sits on 925ha. Upon completion, the project will comprise, among other things, residential and commercial units, international universities, schools, gardens as well as sports and recreational centres.

The company expects the entire development to cater to more than 70,000 residents and 12,000 students.

By The Star (by Yvonne Tan)

SP Setia in venture to build RM750m mall

PROPERTY developer SP Setia, via its subsidiary Bandar Setia Alam Sdn Bhd, today set up a company with an Australian-based wholesale real estate development fund to develop a RM750 million retail mall at its flagship township Setia Alam in Shah Alam.

The Lend Lease Asian Retail Investment Fund 2 Ltd is part of Lend Lease Corporation Ltd, a multinational property development group.

SP Setia’s group managing director Tan Sri Liew Kee Sin said the 50:50 joint venture project is expected to contribute to the group by the end of 2011 after its completion.

The joint venture company called Greenhill Resources Sdn Bhd will acquire from Bandar Setia Alam 30.5 acres of freehold land in Precinct 1 for RM119.57 million, which is inclusive of the development cost, for the mall project.

With a gross floor area of about 1.23 million square feet, Greenhill has appointed American-based design architect, The Jerde Partnership, to create an iconic landmark.

Liew said the mall is targeted to be completed by 2011 and planned as a destination regional mall that not only served the Setia Alam and Setia Eco Park townships, but also to attract the larger Klang Valley population.

There are about 350,000 households within the 30-minute driving perimeter of the proposed mall, which is expected to start construction within the next six months, he said.

According to Liew, the mall will help the group achieve its 20 per cent target of building commercial products in the next two to three years from two per cent now.

He said the group has also reserved land around the mall area vicinity should the government decide to extend the light rail transit (LRT) system to that part of Selangor.

On SP Setia’s performance, Liew said the group is confident of posting a better result for its fourth quarter this year following improved sales.

The group, he said, has been registering sales of between RM100 million and RM120 million monthly.

“We are confident of achieving total sales of RM1.5 billion this year from RM1.2 billion last year,” he added.

On the group’s project in Vietnam, Liew said it is still on with the expected launch in October this year despite the economic downturn there.

“What is happening in Vietnam is similar to what we experienced in the 1997/98 financial crisis. Their interest rate is about 20 per cent while ours now is about six per cent,” he said.

According to him, the project will benefit SP Setia in the long run, especially when Vietnam posts a turnaround, adding that the group also expects to buy more land there.

By Bernama

IOI Properties heading towards privatisation?

IOI Corp Bhd, Malaysia's second most valuable firm, may take its property arm private, make fresh purchases or give its convertible bondholders treasury shares, three foreign investment firms speculate.

Credit Suisse said in a report that there was a high chance of IOI Corp privatising IOI Properties Bhd (IOI Prop) if the latter's rights issue was grossly undersubscribed.

In February, IOI Prop said it planned to raise as much as RM932 million, with its parent underwriting the issue.

"As IOI Corp is underwriting the deal, then IOI Corp may end up with more than 75 per cent of IOI Prop. Although there are other options, IOI Corp can choose to privatise IOI Prop at this juncture, at a minimum price of RM4.85," wrote Tan Ting Min, a research analyst.

Doing so would cost its parent some RM1.1 billion and improve its earnings next year by as much as four per cent, the research house said.

In the year to June 30 2007, IOI Corp made a net income of RM1.48 billion.

In another report, Citigroup said that IOI Corp was on the lookout for new investment opportunities.

Over the past eight years, IOI Corp has pumped in more than RM3 billion to take IOI Oleochemical Bhd private, buy the India-based Aditya Birla's edible oil and oleochemical units in Johor, and acquire 100 per cent of Loders Croklaan BV and its related businesses in the US, Canada and Egypt from the Unilever group.

The purchases have made IOI Corp the world's largest oleochemical group.

Merrill Lynch expects the group to use its treasury shares, stocks bought under buyback exercises, to enhance value. In the first half of this year, IOI Corp paid some RM1.2 billion to buy its own shares.

"The highest form of value-enhancement would be to cancel the shares bought back, or it could issue shares to the CB (convertible bond) holders via the shares bought back, thus mitigating any dilution arising from the conversion," Merrill Lynch's Andrew Lee wrote in a report.

IOI Corp currently has a US$360 million (RM1.2 billion) convertible bond due in 2011, with a conversion price of RM4.70 a share, and a US$600 million (RM2 billion) convertible bond due in 2013, with a conversion price of RM11 a share.

By New Straits Times (by Francis Fernandez)

ECM Libra 'underweight' on property counters

ECM Libra Investment Research has kept its "underweight" call on property stocks as rising construction costs erode developers' margins. The recent fuel hike may dampen property sales and add further pressures on builders.

"We are cautiously calling an underweight now in view of negative outlook in the near term due to escalating construction costs," the broker said in a report.

Although there is bargain-hunting opportunity now, it warns that both earnings and share prices of property companies may drop further.

However, in the mid to long term, developers with prime land bank that focus on upper middle class to high-end properties will be able to pass on cost to home buyers, it said.

ECM Libra said investors can consider buying shares of selected property players, as their share prices have fallen significantly so far this year and very much at distressed levels as compared with the intrinsic value of their landbank.

The broker has YNH Property as its stock pick, saying that its high development margin and prime landbank will put it in a better position to overcome cost escalation.

Despite weakening market, property prices may continue to rise especially for the higher end products as developers seek to defray higher construction costs. However, developers that locked in sales value by pre-selling their properties may face margin erosion even when fixed price building contracts have been given out earlier, ECM Libra said.

Developers may be "forced" to re-negotiate building contracts to avoid contractors delay or abandon the projects because of the high building material prices.

"We expect developers to scale down or defer launches in order not to 'over-expose' themselves to the spiralling construction costs," the report said.

By New Straits Times