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Friday, May 8, 2009

Sunrise mulls keeping cash for strategic buys

Property developer Sunrise Bhd may not pay dividends this year to keep cash so that it can snap up strategic land buys.

The company has a policy of paying 35 per cent of its net profit as dividends. However, its board has yet to decide and it will also consult institutional investors first.

"I personally would like a high dividend payout to shareholders, but this year is different," executive chairman Tong Kooi Ong said.

"Sunrise is being offered tremendous opportunities. Cash kept in the company can come in handy," he told reporters after a briefing on the company's performance in Kuala Lumpur yesterday.

The group's current net borrowing is RM346.7 million. This is expected to fall further, thanks to future cash flow of unbilled sales. (Unbilled sales are sales that have yet to be booked in its accounts.)
In the nine months to March 31 2009, the group chalked up new property sales of RM247 million despite economic uncertainties.

"We've recorded property sales every single month during this challenging period, even in the last quarter of 2008 when conditions were weakest," Tong said.

On Sunrise's proposed development in Canada, Tong said it will be on a build-and-sell basis. However, the group has not decided on the timing of the launch.

On the home front, property sentiment has improved, with interest rates falling sharply and borrowing costs at just between 3.2 per cent and 3.5 per cent.

Many developers deferred property launches last year, allowing for existing units to be taken up.

"There are signs of nascent economic recovery," Tong said.

"We expect a property boom towards the end of 2011, based on historical two-year lag after the global economy bottoms out at the end of this year."

In its filing to the stock exchange yesterday, Sunrise said its third quarter net profit jumped 48 per cent to RM30.57 million from a year ago, thanks to positive contributions from its Solaris Dutamas, Mont Kiara Meridian, 10 Mont Kiara and 11 Mont Kiara developments.

It is hopeful of performing better than in the last financial year given its substantial unbilled sales of RM970 million as at end-March this year.

By Business Times (by Ooi Tee Ching)

Bungalow project to help Sunrise lower gearing

KUALA LUMPUR: Sunrise Bhd expects to reduce its net gearing level of 37.5% with proceeds from The Residence @ Mont’Kiara project, which has registered bookings totalling RM88.4mil.

As the bungalow development was already completed, all proceeds would immediately reduce the company’s current net borrowings of RM346.7mil, said executive chairman Tong Kooi Ong.

On new projects, he said Sunrise would time and price future property launches based on prevailing market conditions.

“We will take into consideration what the market demands are when establishing our costs and product mix,” he said at an analysts briefing yesterday.

The high-end segment would take longer to recover from the current economic downturn, Tong said, adding that there would be greater demand for affordable properties.

“We have a range of potential projects that we can scale up or down depending on the market situation,” he said.

Among the developments in the pipeline are its MK 20 and MK 28 projects within the Mont’ Kiara area and its Solaris Towers project off Jalan Sultan Ismail in Kuala Lumpur.

Tong said Sunrise would launch one of these projects by 2010.

On another note, Tong said the company’s directors had yet to decide whether to declare dividends for the financial year ending June 30.

“We are still undecided. While people buy shares because of the dividends, for this year, we feel that would not be the best decision. We feel our shareholders will benefit more if we invest in assets instead.”

Tong hinted that Sunrise was looking to purchase land for development purposes within Kuala Lumpur but outside the Mont’ Kiara area.

Meanwhile, the company’s net profit for the third quarter ended March 31 surged 48% to RM30.57mil from RM20.64mil in the previous corresponding period.

Revenue rose 5.3% to RM165.22mil against RM156.96mil previously.

The rise was attributed to new sales of some of its property projects, primarily 11 @ Mont’ Kiara and 10 @ Mont’ Kiara. For the nine months ended March 31, Sunrise chalked up new property sales amounting to RM247mil.

“As of March, we have unbilled sales totalling RM965mil which will underpin earnings until end-2011,” Tong said.

By The Star

CIMB: Local real estate deals may fall up to 50% in 2009

DESPITE the impressive rise in the Malaysian stock market in recent days, local real estate supply and demand dynamics still paint a tougher picture for the sector as the nation’s economy braces for a contraction this year.

The combined threats of weaker demand and larger supply of properties have lent credence to analysts’ anticipation that local real estate transaction and prices will fall this year.

The expected decline is, however, not across the board. More glaring examples include luxury condominiums within the Kuala Lumpur City Centre and Mont’Kiara enclaves where prices of high-rise units could tumble up to 40% from their peak.

At the same time, the spotlight also fell on office and retail space, (except hotels), whereby fresh supply could impose downward pressure on occupancy rental and room rates.

CIMB Research wrote in a note yesterday that local real estate transactions and prices could decline in 2009, in line with the projected 3% contraction in the nation’s real gross domestic product (GDP).

Transactions could fall up to 50% in the worst-case scenario, matching the performance seen during the 1997/1998 Asian financial crisis, according to CIMB’s note which was released in response to the latest updates by the Valuation and Property Services Department’s (JPPH).

"However, we believe the fall in residential property prices, particularly, for landed properties, will be less than the drop in the overall economy as property prices have lagged behind economic growth since 2001," said CIMB which rated the local sector a trading buy.

According to JPPH’s latest property market report, in 2008, the country’s transaction value rose 14.5% to RM88.34 billion from RM77.14 billion a year earlier.

The growth in the transaction volume was led by agriculture land, and commercial properties, while the rise in transaction value was spurred by development land and agriculture real estate,

Residential properties made up the bulk or 63.7% of total volume, and 46.8% of transaction value. All states registered an increase in volume except for Putrajaya, Kelantan and Melaka.

The decline in the primary market is worth noting. According to JPPH, the number of newly-launched houses fell 7.3% to 48,830 units in 2008 from 52,664 a year earlier, while residential property overhang rose 9.1% to 26,029 from 23,866.

CIMB said the rise in transaction value for development land could mean that developers were actively acquiring landbank.

Based on the historical strong correlation between property sales, and GDP growth, besides the fact that real estate sales lag GDP expansion by about three months, the market is predicting that the country’s property sales could bottom, at the earliest, in the first quarter of 2010.

Real estate, and equity prices tend to move in tandem, although, equities prices tend to reach the equilibrium faster because stocks are deemed easier to liquidate compared to properties.

According to CIMB, the fact that shares of real estate firms were heavily sold down in recent months could mean a potential upside in their prices as the broader market recovers.

"We recommend investing in selected property stocks as they provide investors a leveraged exposure to the stock market.

"We are more bullish about the stock market’s outlook for 2009 and expect the Kuala Lumpur Composite Index to end the year at 1,060 points," said CIMB.

By The EDGE Malaysia

LBS Bina in JV for mixed property project

PETALING JAYA: LBS Bina Group Bhd has formed a joint venture with Astana Modal (M) Sdn Bhd for a 70-ha mixed property development project in Puchong.

In a filing with Bursa Malaysia yesterday, LBS said its subsidiary LBS Bina Holdings Sdn Bhd had been appointed the project manager of the development by Astana.

The project, with a gross development value of RM1bil, comprises 1,100 property units including bungalows, semi-detached homes, superlink houses, luxury condominium and commercial units.

Astana is providing the land while LBS would have to bear the cost of development, to be funded via internally and bank borrowings. The construction is expected to be completed in five years with the profit ratio at 70:30 for LBS and Astana.

LBS said the project, which was expected to contribute positively, would add 70ha to the group’s existing landbank, giving a total of 1,080ha for future growth and profitability.

LBS director and substantial shareholder Badrul Ahmad is also a director of Astana in which he owns a significant stake.

By The Star

LBS Bina clinches deal for Sepang project

PROPERTY developer LBS Bina Group Bhd has clinched a contract as a project manager to carry out a mixed property development project on 70.81ha in Sepang.

The project, which is being developed by Astana Modal (M) Sdn Bhd, has a gross development value of RM1 billion.

LBS said it expects the development to contribute some RM1 billion income to the company over a period of five years.

By Business Times

Property stocks up midday

KUALA LUMPUR: Asian markets were off their morning’s low at the midday break on May 8 , with the KL Composite Index also following suit on some buying interest in lower priced stocks.

Property stocks were among the major gainers which included Bina Darulaman, Magna, UEM Land, KLCCP and Sunrise.

At 12.30pm, the KLCI was up 0.07 of a point to1,023.54. Turnover was 1.85 billion units valued at RM939.3 million. Advancers led decliners 395 to 227 while 189 stocks were flat.

Light crude oil continued to advance, adding 50 cents to US$57.30. Crude palm oil futures fell RM4 to RM2,616.

Among key Asian markets, Japan’s Nikkei 225 rose 0.3% to 9,414.27, Hong Kong’s Hang Seng Index added 0.2% to 17,253.63 while Singapore’s Straits Times Index gained 0.9% to 2,262.22.

Bloomberg reported Japan’s economy was no longer in freefall and would rebound as global demand picks up, according to a member of the government committee that charts the economic cycle.

“The worst is over,” Takao Komine, 62, an economist and professor at Hosei University in Tokyo, said in an interview yesterday. “We’ll probably see the beginning of recovery at the end of this year.”

Property stocks topped the gainers list with Bina Darulaman surging 28 sen to RM1.10 with 1,800 shares done. Magana added 23 sen to RM2.60, UEM Land 18 sen to RM1.38, KLCCP 12 sen to RM3.30 and Sunrise 11 sen to RM1.57.

MISC and Bursa added 15 sen each to RM8.65 and RM7.20 while Petra Energy gained 12 sen to RM1.64 and Dutch Lady 10 sen to RM10.20. Compugates was the most active with 126 million shares done, added 0.5 sen to 15 sen.

BAT was the top loser, down 25 sen to RM41.75 while DiGi and BCHB fell 20 sen each to RM21.80 and RM8.75 while UBG and Top Glove shed 15 sen each to RM2.72 and RM5.80 and Kulim-WB 12 sen lower to RM3.24.

By The EDGE Malaysia

Dubai residential rental prices drop 23pc in Q1

DUBAI (United Arab Emirates): New research has shown Dubai residential rental prices dropped 23 per cent in the first quarter of 2009 as the economic downturn forced foreign workers to pull out of the fast-expanding city.

Yesterday’s report by real estate company CB Richard Ellis has attributed the decline to job losses among expatriates, a drop in tourism and a considerable new supply of homes.