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Tuesday, March 31, 2009

Suria KLCC eyes 5pc growth in retail sales

AMIDST the gloomy outlook of a weakening economy and dampened consumer sentiments, one of Kuala Lumpur's shopping bright spots, Suria KLCC, expects total retail sales to grow for the 11th consecutive year.

The premier shopping centre, housing 330 specialty stores within the 1.04 million sq ft of retail space, hopes to grow total retail sales by up to 5 per cent to about RM2.1 billion this year.

The growth, though small compared to the 15 per cent in 2007, is still better than its marginal growth in 2008.

Retail sales were stable at Suria KLCC last year amidst lower traffic count as a result of an additional 2.9 million sq ft of retail space in the market (at the Pavilion Kuala Lumpur, The Gardens Mid Valley and Sunway Pyramid) and high fuel price.

Suria KLCC Sdn Bhd's chief executive officer Andrew Brien said this year's strategy is to get customers to stay longer and spend more.

"In 2008, we grew by a few percentage points to just over RM2 billion in sales, despite a 4.5 per cent drop in traffic (to 42.02 million) from 44 million in 2007. We have been able to maintain modest growth in what has been a challenging environment. This is a testament of our strength," he told Business Times.

In a previous interview, Brien had noted that the high growth experienced for two-and-a-half years (between mid 2004 and 2007) would be nearly impossible to sustain forever.

Suria KLCC is a 60:40 partnership between KLCC Property Holdings Bhd and ING Real Estate.

For the financial year ended March 31 2008, Suria KLCC registered RM232.3 million in revenue, representing a 8.2 per cent growth from RM214.7 million achieved in the previous year.

The 57 per cent urbanised Malaysian population and a higher level of job security, particularly for those in the Klang Valley as well as the high spending tourist crowd, also works in the mall's favour.

"If there has been a drop in tourists numbers we have not seen it. They still account for 20 per cent of our business as they are big spenders," he said.

He added that even rentals was not an issue at the mall. "If a mall is successful, rent is never an issue," he said, adding that Suria KLCC does not plan to cut its advertisement and promotion spending for 2009.

"We have a good team, a good product, and we want to make sure it remains great," he said.

Apart from investments to spruce up the mall, Suria KLCC has also remixed the retailers to drive sales. Some of the recent additions include Harrods, Ed Hardy, Mulberry, 7 For All Mankind and ck Calvin Klein Accessories.

By Business Times (by Vasantha Ganesan)

TSR to build, equip RM1.7bil hospital

PETALING JAYA: Construction group TSR Capital Bhd looks set to build and equip a teaching hospital costing RM1.7bil for International Islamic University Malaysia (IIUM) in Nilai, Negri Sembilan.

Prime Minister Datuk Seri Abdullah Ahmad Badawi will today officiate the ground-breaking ceremony for the hospital which will be funded by private finance initiative (PFI).

Under a PFI scheme, a private sector company will finance the development of infrastructure and lease it to the Government over a period of many years.

TSR recently announced to Bursa Malaysia that it has received approval in-principle from the Economic Planning Unit for its subsidiary Medicalcity Corp Sdn Bhd to develop a post-graduate teaching hospital for IIUM.

The project remains subject to terms and conditions to be negotiated and a concession agreement to be executed.

TSR senior accountant K. K. Ng said Medicalcity was a joint-venture company that was 70:30 owned by TSR and Lembaga Tabung Haji (LTH) group.

Medicalcity would design, manage the turnkey construction and finance the development of the hospital while TSR would construct and equip the facility, Ng told StarBiz yesterday. After TSR has completed construction, Medicalcity will provide maintenance services for the hospital and its facilities over the next 30 years.

“The doctors can focus on medical treatment and teaching while the building and facility maintenance services are outsourced to us,” Ng said.

The PFI arrangement will be under a build-lease-maintain and transfer (BLMT) scheme where the facilities will be transferred to the Government at the end of the lease period.

There will be key performance indicators to be adhered to by Medicalcity in its maintenance contract for the facilities.

The total development cost of RM1.7bil comprises about RM1bil for construction of the hospital and about RM700mil for the medical equipment.

While that is a huge sum to finance at this time, it is doable because bankers would be comfortable with the Government as the customer. Even so, Medicalcity will work on a debt-to-equity ratio of 80:20 as against a higher leverage of 90:10 that was originally planned.

“That’s to enable us to work towards a triple A rating for the bank loans. Bankers will be more comfortable if we put 20% of equity into the financing structure,” Ng said.

The teaching hospital will be built on a large piece of land in Nilai that’s owned by the Higher Education Ministry, and within Bandar Enstek that is being developed by a joint venture of Negri Sembilan State Development Corp and TH Properties Sdn Bhd, a subsidiary of LTH.

It is also near a 370-acre site owned by TH Properties and planned for a medical city. It is expected that TH Properties will form a joint venture with TSR to develop that.

The medical city will comprise facilities to offer services such as a combination of western and eastern or herbal medicine and treatment.

The whole concept focuses on the dual objectives of training knowledge workers and making available herbal treatment in a managed facility.

By The Star (by C.S.Tan)

IOI Corp offer for IOI Prop to close today

KUALA LUMPUR: IOI Properties will be suspended with effect from April 7 and be removed in due course from its listing on Bursa Malaysia.

AmResearch said in a research note said the final closing date of the voluntary takeover offer was on March 31.

On March 30, IOI Corp announced the level of acceptances for its voluntary takeover of IOI Properties had reached 90.65% of the latter’s issued and paid-up share capital on March 30.

IOI Corp had previously said that as long as it received acceptances resulting in the minimum level of 90% shareholding in IOI Properties, it would suspend and delist IOI Properties.

Shareholders of IOI Properties, who have not accepted IOI Corp’s voluntary takeover offer of the company, will face the risk of holding shares in an unlisted company. The only form of return that they would get would be dividends.

“To recap, we view the privatisation of IOI Properties positively as IOI Properties is being acquired close to the bottom of the property cycle.

“Offer price of RM2.598 per share values IOI Properties at an annualised FY09F price-to-earnings (PE) of 8.9 times and price to book value (P/BV) of 0.7 times versus the sector’s average P/BV of 1.1 times,” said the research house.

AmResearch said the acquisition of IOI Properties would increase IOI’s FY10F net profit by 4% to 5% as the elimination of minority interest would more than compensate for the increase in IOI’s share base and loss of interest income.

After the privatisation exercise of IOI Properties, IOI Corp would still have plenty of cash left in its reserves.

The group’s gross cash and cash equivalents amounted to RM1.9 billion as at end-December 2008. Cash outflow from privatising IOI Properties was about RM66 million.

“We believe that IOI Corp would most probably still be looking for acquisitions or expansions in the downstream segment of oleochemicals or specialty fats.

“We maintain a Buy on IOI Corp as it will benefit from improving crude palm oil prices. IOI Corp is one of the more efficient plantation companies in the country,” it said.

By The EDGE Malaysia (by Joe Chin)

Axis REIT plans bond sale in first half

AXIS Real Estate Investment Trust, the world’s only Islamic office and industrial REIT, plans a bond sale in the first half of 2009 to help refinance debt as it prepares for potential acquisitions this year.

“There’s nothing worse than having the sale of the century if you haven’t got any money to buy anything,” Stewart LaBrooy, chief executive officer of Axis REIT Managers Bhd, manager of the property trust, said in an interview yesterday. “There’s a lot of opportunities and fat pickings.”

Axis REIT, which is eyeing RM100 million (US$27 million) of property assets, may sell Islamic bonds under a seven-year program to refinance about RM220 million of debt, he said. It may also sell new stock to private investors.

Axis owns RM726.4 million of assets in Malaysia, from offices and warehouses to logistic centers. It is taking advantage of a global recession to snap up properties at cheaper prices and ride on an eventual rebound when economies recover.

Axis may raise about RM70 million selling new units to private investors to help fund any acquisitions, LaBrooy said. It raised RM90 million last year from a placement of 50 million units and will consider the fund-raising plan once it refinances its existing debt, he said.

Axis REIT’s stock has gained 18 per cent this year, making it the second-best performing property trust in Malaysia, outpacing the benchmark Composite Index’s 0.7 per cent decline.

By Bloomberg