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Tuesday, February 10, 2009

Mulpha confident of riding out economic storm

Property developer Mulpha International Bhd, which has slowed down its capital expenditure, is reducing overheads and battening down the hatches to weather the current economic storm.

"While we are monitoring the market closely and conscious of our capital expenditure, we are confident of the quality of our developments and assets and have a strong balance sheet to ride out the current economic storm," its executive chairman Lee Seng Huang told Business Times in an interview.

He believes that there is still considerable wealth on the sidelines, citing recent sales of properties at its developments in Australia which saw buyers making purchases without the need for any financing.

Lee said that Australia would continue to be the most profitable market for Mulpha, contributing some 70 per cent to the group's revenue and net profit.
Mulpha, which has invested A$1.2 billion (RM2.8 billion) in Australia, owns properties worth several billion ringgit.

They include the Sanctuary Cove; Hyatt Regency Sanctuary Cove; InterContinental Sydney; Hilton Melbourne Airport; Norwest Business Park Sydney; The Hotel School Sydney; Bimbadgen Estate in New South Wales' Hunter Valley; and Hayman Great Barrier Reef.

Lee said it had been difficult for Mulpha to find sufficient assets of scale at the right price on the domestic front.

In the nine months to September 30 2008, Mulpha posted net profit of RM14.3 million on revenue of RM741.6 million.

On another note, Lee said that Mulpha might sell assets for higher returns and reinvest the capital.

Mulpha has been conscious of its gearing levels. In the last two years, it has sold the Novotel in Sydney, Sheraton in Brisbane and Sydney Opera House Carpark.

It has a portfolio of hotels and residential, commercial and industrial properties under its stable in Malaysia, Singapore, Vietnam, Hong Kong and mainland China, as well as Australia.

Its assets in Malaysia are worth RM1.5 billion, the largest being the Leisure Farm resort project in Iskandar Malaysia in Johor.

While its investments in Singapore, Hong Kong and mainland China are still small, Mulpha also owns the fully-tenanted Indochine Park Tower in Ho Chi Minh City, Vietnam, where its investments are being maximised by renting out any vacant units at higher rates.

"In terms of asset disposals, we have always maintained that if we can get higher returns by selling and reinvesting capital we will, but we are not selling for the sake of selling. There are no plans yet to sell," Lee said.

"Our assets have a low-cost base and we have not revalued them upwards on our balance sheet. But any sale we make will have good margins. Investors are cautious now and we cannot predict when they will be more willing to buy," he added.

Mulpha may also consider restructuring or recapitalising real estate investment trusts (REITs) that are under performing in the market.

"Since most REITs are trading substantially below their true worth, they are good target acquisitions now. It would be cheaper to buy REITs instead of an underlying collection of assets," Lee said.

By Business Times (by Sharen Kaur)

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