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Saturday, June 27, 2009

Supportive plans to buy foreign distributor

An artist's impression of terraced houses at Supportive's Aman Bayu project

GEORGE TOWN: Supportive International Holdings Bhd plans to acquire a foreign supply chain-cum-distribution company this year.

The acquisition of such a company was in line with the group’s plans to produce its own brand of audio-visual consumer electronics products soon, executive chairman Lee Kuang Shing told StarBizWeek.

“We plan to produce consumer electronic items such as DVD players and LCD panels.

“The company we are targeting will help us market and distribute our own brand of consumer electronic products to European countries,” he said after Supportive AGM.

Lee said he expected the economy to recover by the year-end. “The forthcoming 2012 Olympics in London should spur consumer spending,” he said.

On the group’s original equipment manufacturing business for Panasonic and JVC, Lee said it did not experience a slowdown.

“In fact the business generated stronger profits as raw material prices plunged,” he said.

For the first quarter ended April 30, the group posted about RM3.8mil pre-tax profit on revenue of RM15mil, compared with RM1.2mil and RM22mil respectively a year ago.

Supportive makes home equipment theatre systems for Panasonic and JVC.

“Our competitive edge is that we have the capability to produce the components and plastic injection moulds, and source competitively-priced raw materials for our customers,” Lee said.

On the group’s property development business, Lee said its RM360mil Aman Bayu project in Butterworth would contribute about 30% to revenue this year.

“We have sold half of the 100 three-storey terraced houses priced about RM350,000, which were launched early this year.

“The second and third phases, comprising 250 semi-detached houses and bungalows, will be launched next year,” he said.

By The Star (by David Tan)

Analysts optimistic market is turning around

An artist's impression of St Mary serviced apartments by Eastern & Oriental Bhd

HIGH take up rates for some recent property launches could be an early sign that the local property market is bottoming out and is starting to turn around like other regional markets after an 18-month slump, property analysts say.

They pointed to the fact that three project launches over the past month, from suburban mass market to high-end condominium projects, registered superb take-up rates within a week or two of their respective launches (see table). This can be attributed to attractive financial packages by some property developers.

Reflecting the improved market sentiment, residential housing loan approvals recovered 89% to RM6.3bil in April, after touching a low of RM3.3bil in January.

Perhaps the most compelling case was Eastern & Oriental Bhd’s (E&O) much awaited launch – the St Mary serviced apartments in the heart of the Golden Triangle, which recorded a whopping 85% take up rate during its preview launch on June 12.

This type of strong take-up is usually seen for landed properties in prime residential areas and not for high-end condos in KLCC.

While prices started at RM833 per square feet, the bulk of the 169 units offered for its East Tower was sold at above RM1,000 psf.

Property analysts who attended the launch preview say that the studio apartments were snapped up in minutes. “An 85% take up rate is hard to ignore. St Mary’s second tower will be launched six months later, at an estimated 20% higher price,” says a property analyst from Hwang DBS Research.

E&O is not an isolated case.

SP Setia Bhd’s Sky Residence, which is behind the National Heart Institute in Kuala Lumpur, recorded a 100% take up rate for its 220 units of Tower A apartments, selling at an average price of RM680 psf. Tower B has so far recorded a 50% take up rate. These condos too, have yet to be officially launched.

SP Setia’s Setia Walk serviced apartments (RM330 psf) and Setia Vista linked houses (RM600,000) in Shah Alam which were launched early this year have both recorded 70% take up rates.

Island & Peninsular Bhd’s 110 linked houses in Kinrara, Puchong were sold out in three days from its launch date of June 6.

Looking at the data from the Property Market Report 2008 released in May, it was verified that transaction values notched a brisk rate of 14.5% while the number of transactions went up 10%. Less surprising was the decent rise in house prices for most part of the country. Overall house prices appreciated 4.8% in 2008, matching the gain in 2007. Of the big-3 markets, Penang enjoyed the steepest appreciation of 10.4% while the Klang Valley gained 4.5%.

Meanwhile, the first upgrade in the sea of sell calls comes from UBS Research, which says that cheap financing available, low interest rates and a recovering stock market will fuel sentiment and create wealth that can be deployed into property.

“In the property upcycle that is just starting, we forecast residential property transactions in Malaysia to increase 10% to 15% per annum in 2010-2012 to RM59bil by 2012; starting with mass-market housing, then spreading to mid- to up-market landed residential properties and finally to up-market condominiums,” says UBS Research.

It adds that the overhang of completed and unsold properties in key markets of Klang Valley, Johor and Penang have also stabilised.

In value terms, the overhang is 7% of transaction in the Klang Valley, 3% in Penang and 37% in Johor. For the whole of Malaysia, the overhang is 11%.

While many may say that Malaysian property is barely affordable, UBS highlights that the estimated average house price in the Klang Valley was only RM291,477 in 2008.

CIMB head of research Terence Wong has a trading “buy” stance on the property sector for its leverage play on the broader market and bombed-out valuation.

“Although the outlook for the sector remains difficult, the sector held up better than expected in 2008. This increases the odds of a manageable consolidation for the industry in 2009, rather than a steep decline.

“SP Setia remains our preferred play on the sector for its excellent management, size and liquidity. Sector re-rating catalysts include a broad market rebound in the second half and attractive valuations,” he says.

Developers with new products to launch are E&O, SP Setia, DNP Bhd and IJM Land Bhd.

Upturn in Singapore and Hong Kong

In Singapore and Hong Kong, the trend has started convincingly since February.

Singapore released May new home sales on June 15. New units sold were close to the previous peak of more than 1,700 units for a single month in August 2007, at 1,668 units.

This is the fourth consecutive month that monthly new home sales had exceeded 1,000 units with high-end units moving fast. Prices transacted range from S$1,100 to S$1,600.

In Singapore, the queues are forming again. One example is the Vista Residence freehold condominiums by the country’s largest private property developer, Far East Organization. Of the total 282 unit, it has launched 52 and sold 38. The two-bedroom units are going at S$1,070 psf.

On the evening of June 24, buyers started lining up to buy the 68 units offered at Residences @ Killiney by Hoi Hup Realty Pte Ltd. Prices are assumed at US$2,000 psf.

Meanwhile, the Hong Kong real estate market is showing signs of revitalisation as the housing price index (which includes luxury residences) has risen 13.3% so far this year, and sales numbers have steadily increased.

By May 10, the index had reached 64.34, after rising for a five week period.

According to Hong Kong’s Land Registry, April saw an increase of home sales from 8.9% in the previous year to 9.86% this year. This is notably the first gain in the last 11 months – a good indication of better things to come. The value of unit sales rose 14.6%, the first gain since June 2008.

Luxury home prices in Hong Kong are Asia’s second-most expensive, and seeing an increase in prices in that market is certainly a sign that a turnaround is in the works.

With Premier Wen Jiabao’s US$585bil stimulus package, the outlook has certainly improved tremendously from the bleakness of a few months ago.

By The Star (by Tee Lin Say)

Gold Coast Resort developer to invest RM50m in Kenyir project

The STG Group, developer of the Gold Coast Resorts projects, will be investing RM50 million in a lake holiday resort in Kenyir, Terengganu.

This development is the Gold Coast Resorts developer's second project in the East Coast Economic Region (ECER). Its first is the RM10 million Gold Coast Kuantan resort, consisting of 99 apartment suites with views of the South China Sea .

"The Gold Coast Kenyir development will be unique. The project will be made up of a hotel mall with shops, long houses and bungalows built over Lake Kenyir's serene waters," Datuk Dr Alex Tan Siong Seng, chairman of STG Group, said in a statement.

"We are optimistic this project will help draw more tourists to Lake Kenyir to enjoy its natural scenic beauty and water sport," he added.

Lake Kenyir is Asia's largest man-made lake. It contains about 23.6 million cu m of water and covers an area of 369 sq km. Under the ECER's master plan, the lake has been designated for agro-tourism where it will be boosted by aquaculture and tourism.

The Gold Coast Kenyir project will be rolled out in March 2010, kicking off with the construction of 88 bungalows nestled over Lake Kenyir , followed by 188 units of long houses and a hotel mall.

The STG Group is targeting to be listed by 2012.

Other Gold Coast properties include Gold Coast Morib Resort, Nottingham International apartments, located near the Nottingham University in Klang Valley; and Gold Coast Pulau Pangkor.

By Business Times

STG Group plans RM50m resort in Kenyir

KUALA TERENGGANU: The STG Group, which develops the Gold Coast Resorts projects, will invest RM50 million in a lake holiday resort in Kenyir, making it the second project in the East Coast Economic Region (ECER).

The Gold Coast Kenyir project, will be built over 53 acres, and will start in March 2010. The first phase is 88 bungalows built over Lake Kenyir, followed by 188 long houses and a hotel mall.

“The Gold Coast Kenyir development will be unique. The project will be made up of a hotel mall with shops, long houses and bungalows built over Lake Kenyir’s serene waters,” said STG Group chairman Datuk Dr Alex Tan Siong Seng.

“We are optimistic this project will help draw more tourists to Lake Kenyir to enjoy its natural scenic beauty and water sports,” he said.

Lake Kenyir. which is Asia’s largest man-made lake, contains about 23.6 million cubic metres of water and covers 369 sq km. Under the ECER master plan, the lake has been designated for agro-tourism.

“This Lake Kenyir development, like other Gold Coast projects, offers good investment value as well as unrivalled lifestyle and leisure activities,” said Tan.

“Purchasers own a luxury holiday property built over the lake which is run like a hotel and enjoy nature’s scenic beauty. At the same time, they can also choose to have their property managed and rented out on a nightly occupancy basis by a professional company when they are away.

“This rental programme gives owners 8% returns per annum on their investment for up to 15 years, without sacrificing their ability to use the property or any other Gold Coast property for up to 60 days if they chose to.”

While the Gold Coast’s projects are bought off the plan, Dr Tan said owners can expect capital appreciation of 40% after five years from the date of purchase.

“Our buyers are equally split up between domestic and foreign purchasers. Some 80 per cent of them have signed up for the investment plan while the balance will be owner occupied,” he said.

The Kenyir project is the second for the STG Group in the ECER. The first is the RM10 million Gold Coast Kuantan resort, consisting 99 apartment suites.

Other Gold Coast properties include Gold Coast Morib Resort, Nottingham International apartments, located near the Nottingham University in Klang Valley; and Gold Coast Pulau Pangkor.

By The EDGE Malaysia (by Joseph Chin)

PNB not likely to take SP Setia private

PETALING JAYA: There is a possibility for Permodalan Nasional Bhd (PNB) to raise its 32.9% stake in SP Setia Bhd to the takeover trigger threshold of 33%, but industry observers believe the investment institution is unlikely to take the property company private or meddle in its affairs.

SP Setia is regarded as the industry trendsetter under the leadership of Tan Sri Liew Kee Sin

“It will be a very costly exercise for PNB to buy the remaining SP Setia shares that it does not already own. At yesterday’s market closing price of RM4.06 per share, this will cost about RM2.8bil.

“But most importantly is whether PNB can further add value to SP Setia if it is being taken private at current valuations which is expensive. It is currently trading at 19 times of FY2009 earnings estimate,” ECM Libra property analyst Bernard Ching told StarBizWeek.

PNB’s accumulation of SP Setia shares since March last year has kept the shares at a much higher valuation than the industry’s average. The pace of its share buying in the company picked up when the global financial crisis started last June that prompted some of the foreign funds to liquidate their positions.

Ching believes that the recent appointment of two nominee directors of PNB is nothing more than a check and balance to safeguard their significant investment in SP Setia rather than to exert influence over the management of Malaysia’s biggest property developer by market capitalisation.

SP Setia president and chief executive officer Tan Sri Liew Kee Sin owns 12% in the company while the Employees Provident Fund and US-based Capital Group also have 12% each. Other foreign shareholders hold another 14%.

The company’s current chairman, Tan Sri Abdul Rashid Abdul Manaf, had assumed the chairmanship since Jan 15, 1996.

Referring to concerns expressed by the investment community that PNB had taken three property companies – Island & Peninsular Bhd, Petaling Garden Bhd and Pelangi Bhd – private between 2005 and 2007, Ching said the situation was different for those companies.

“These companies do not attract the kind of investors’ following as SP Setia and they were under-valued. Furthermore, PNB only spent about RM1.7bil in total following the mandatory general offers to take them private,” he said.

So, is there a likelihood for PNB after its takeover of SP Setia to merge it with the other three property companies?

“This is very unlikely as it will severely dilute SP Setia’s value. The management style of Liew and the other PNB-appointed chiefs may be very different and a significant amount of time and effort may be required to align these differences,” Ching pointed out.

He said a more likely scenario would be joint development of PNB’s vast land bank under SP Setia’s well-established brandname.

By doing so, PNB can leverage on SP Setia’s vast expertise in turning around large greenfield parcels into townships, while SP Setia can avoid heavy holding cost from new land acquisitions.

HwangDBS Vickers Research senior property analyst Yee Mei Hui said since its transfer to the Main Board in 1996, SP Setia had quickly built up its reputation as a blue-chip property stock and darling of the investment community.

The company’s good dividend payout record at the rate of about 60% of net earnings since 2005, and its capital appreciation over the years have certainly contributed to its stature.

With its track record as one of the top industry performers in terms of sustainable earnings and sales, she said SP Setia was well known for its innovative marketing expertise and product offerings.

Led by its charismatic chief, Liew, 51, SP Setia is highly regarded for being the industry trendsetter in terms of product design, good price premium for its properties and high quality. Its capability in product innovation and designing has won the company many industry awards, both on the local and international stage.

SP Setia’s 4,000 acres of land bank in the Klang Valley, Penang and Johor have all the infrastructures in place and are all paid for. They will last the company at least another 10 to 15 years.

At the end of the day, if PNB’s investment strategy in SP Setia is for long-term value enhancement, then the current Liew-led management will continue to be the faces of SP Setia for many more years to come. PNB could not be reached for comment.

By The Star (by Angie Ng)

Too early to rejoice, say developers and consultants

DEVELOPERS and consultancies are taking a cautious stand on analysts’ optimism that the market is finally turning around.

While they rejoice over the positive signs, they are of the view that “it is too early to tell” if the sector has turned from the worst.

“The issue is sustainability,” two developers and two consultancies say. They prefer to wait for the year-end before they pop the champagne bottle.

Hall Chadwick Asia Sdn Bhd chairman Kumar Tharmalingam says he would like to look further and be more cautious.

“I will not be convinced until I see the third-quarter results. In fact, I would like to look at the next six months. If the stock market hold up until the end of the year, I would say we are at the beginning of a possible bull run and with that, the property market will improve.”

Kumar says Europe is not exactly out of the woods yet and while a dip there may not have such a big effect on Malaysia and Southeast Asia, they do buy quite a bit from China.

“If China’s economy dips further, that will affect us,” says Kumar.

He says analysts are rejoicing because the developers are seeing an upturn due to better sales volume.

“Sales volume have been good because of the close co-operation between the banks and the country’s top 20 developers. The two factors which pushed developers and bankers to work together was the slowdown which started in September 2008 and the buoyant secondary market last year.

“Because of the meltdown, buyers took a back seat. Because developers needed to sell, they sought the cooperation of the banks.

“At the same time, in Selangor, out of 217,000 units of homes that exchanged hands last year, 63% were between individuals. That means, they did not buy from developers. The situation was the same for Penang and Johor,” says Kumar.

Home buyers like the security of being able to touch and feel the property before they buy and developers know that. Because buyers went to the secondary market, developers sought the help of banks to make buying from developers more attractive. The result is the special financing programmes,” says Kumar.

Beginning with SP Setia’s who started the Setia 5/95 Home Loan Package where buyers pay 5% and need not fork out stamp and legal duties, the other developers subsequently followed with 10/90 and other variations.

“Once the toothpaste has come out of the tube, you can’t put it back and so other developers had to follow. The result is better sales volumes, which we are seeing today. This need not necessarily translate into higher ringgit sales because developers are absorbing the cost of interest until vacant possession of the property, stamp duties and legal fees, which they previously used to pass on to their buyers.”

The impact of absorbing this cost will be felt by the developers for the next two to three years, he says.

“These positive signs are limited to major centres like Klang Valley, Penang and Johor, but for the time being, this is good enough. But it does not constitute a property turnaround; it is an upturn for the developers in terms of sales,” he says.

On commercial properties, he says the sub-sector is still relatively quiet and the attractive financing schemes are not for commercial projects. Within the Klang Valley, there have not been many launches.

“At this point in time, there is more demand for housing than commercial space. There is an over supply in the commercial sector and this can be seen in Kota Damansara where literally hundreds of shop-offices have come up and most of them are empty,” he says.

Another source from a major real estate consultancy, who requested anonymity, says he sees no real change in his business.

“The manufacturing sector is still doing badly and this will affect employment. People will be cautious. There is also the issue of oversupply, especially of condominiums.

“In the office space sector, we are seeing developers and landlords gearing up for higher vacancies. Some of them have become more flexible in their pricing. Landed property prices are quite stable but we are seeing lesser transactions, which means prices are still hovering around last year’s levels.

“Buyers are taking a wait-and-see stand. In the condominium market, surprisingly, we have sold RM8mil to RM10mil so far this year. There is a pick-up in enquiries and people are still looking for good deals.”

In the rental market, he says the market is seeing a further softening. The asking and concluded rentals for high-end condominiums are lower than what they were six months ago.

Echoing Kumar, he says the condominium market around the KLCC area is beginning to stabilise between RM800 and RM1,000 per sq ft while the premium ones like Troika may hold its own at around RM2,200 per sq ft.

“We are seeing new levels of lower prices where buyers are prepared to come in,” he says.

On the optimism from certain quarters, he says this is due to developers seeing more transactions in the last few months.

Two developers contacted say it is too early to say anything and sustainability of sales is an issue.

The two senior executives from the companies concurred that the market has been performed pretty well “because we have concentrated on the domestic market and offered attractive packages. Although the market is slowly picking up, it is still too early to say there is a turnaround.”

By The Star (by Thean Lee Cheng)

Time to sharpen saws and make a difference

With signs of the economy and property market bottoming out in the coming months, developers should get back in shape and ready themselves for a more active pace and competition from their peers.

After a long lull that started around September last year, things will start to pick up again if all goes well in the global and local economic fronts. Hit by the widening impact of the global financial meltdown in the past one year or so, many project launches have to be deferred and developers were mostly selling unsold stocks from earlier launched projects.

Getting back into the business should be quite easy for most of the property companies as they have already build up their landbank and some even have project plans and approvals in place and are just waiting for the market to turn around to launch their projects.

While there are developers who have kept themselves active with projects to build and sell, there are also those who have no projects to proceed with and remain in “siesta mood” during the past few months.

It is time to jolt out of this mode and start “sharpening their saws” to make a difference and create more value for property buyers.

There have been much changes during the short spate of economic upheavals and it will be worth starting on the right footing.

Despite the pensive mood of most developers after the poor reception for their projects during those “under performing” months, there is no time to waste by brooding over what could have been if the market had continued to ride on the high gear that peaked before the global crisis sets in.

One consolation for property buyers and developers is the prevailing positive industry environment now; low mortgage rates are supporting property buying and investment activities.

Since May last year, the country has experienced negative real interest rates and this encourages the purchase of property as a hedge against inflation.

Buyers are having a field day with various promotions introduced by developers whereby stamp duty, legal fees and interest during construction period (some even extend by another year after delivery of the property) are borne by developers. These facilities have reduced upfront cost of property ownership.

However, this deal, that can be rated as among the best for property buyers so far, will not last forever as most developers are looking to end the facility in the next few months.

SP Setia Bhd, which was the first developer to come out with its Setia 5/95 Home Loan Package on Jan 19, will be ending it on July 19. The rest of the developers are bound to follow suit shortly after that.

The packages and low entry cost have prompted many buyers to make multiple purchases during the promotion period as they only need to make a downpayment of either 5% or 10% of the property price for each purchase and need not make any further payments until the property’s delivery in the next two to three years.

Whether the buying will continue after the facilities are withdrawn is a big question that have no immediate answer. Only time will tell and it is left to the ingenuity of developers on what value they can bring to their projects to attract buyers.

Buyers will continuously be looking for value buys in the coming days and will shop around for good quality products that offer them a good environment and amenities, safety and security, quality management and maintenance, among a long list of other needs.

Developers should have the right understanding of what the buyers need in the fast changing world today.

The rapidly rising temperature and searing heat we experience as a result of the worsening global warming should encourage developers to look into more breezy and well ventilated designs for their property products, whether they are residences or office buildings and other commercial projects.

At the end of the day, developers that put in the right effort to genuinely plan for the well being and comfort of their buyers will triumph.

● Deputy news editor Angie Ng says to celebrate the end of the long, gruelling crisis days (when they are finally over), it should be a good start for the industry if there are developers who can offer some really cool and refreshing “green” model projects.

By The Star (by Angie Ng)

Mah Sing expects to conclude talks with PNB soon

PROPERTY developer Mah Sing Group Bhd expects to conclude talks with the country's largest fund manager Permodalan Nasional Bhd (PNB) soon to jointly develop the latter's landbank in Kuala Lumpur and Johor.

Mah Sing group managing director Tan Sri Leong Hoy Kum said it has been discussing and exploring the possibility of working with PNB.

"PNB is a valued shareholder and if there is an opportunity, we would like to work with PNB be it to develop land in the Klang Valley, Johor Baru or any other land in its stable," he said after the group's annual general meeting in Kuala Lumpur yesterday.

"Of course, any joint venture would need to match PNB's investment criteria and fit Mah Sing's business model," Leong added.
PNB, which has some 20 per cent stake in Mah Sing, has parcels of land scattered in the city centres, such as those held by its unit Malaysian Industrial Development Fund Bhd, which wholly owns MIDF Property Bhd.

Mah Sing is projecting RM435 million sales this year, helped by its financial package offering that was launched in January.

Its Easy Home Ownership programme has reached RM317 million in sales so far, which represents 70 per cent of its full-year target.

As at March 31 2009, Mah Sing had gross development value and unbilled sales of RM3.8 billion, which will keep it busy for the next five to seven years.

Apart from Malaysia, the group is exploring potential property development projects in China and Vietnam for their lower priced land and high population growth.

By Business Times (by Zurinna Raja Adam)

Mexican entrepreneur wants to turn KidZania into global brand

A model of Kidzania. Xavier Lopez Ancona (inset) says from his planning of a day-care centre, the theme park turns out to be something even more fun and bigger that could attract an even larger crowd

CHILDREN’s role-playing is a universal concept that has existed for thousands of years. Identifying this as a business opportunity, Mexican entrepreneur Xavier Lopez Ancona founded the KidZania theme park in 1999.

The president on KidZania International told StarBizWeek that the idea for KidZania started 12 years ago when his childhood friend approached him to start a business in day-care centre that would offer a variety of activities that could attract children.

Ancona was then a very successful executive in the equity capital group department of the multinational technology and services conglomerate, General Electric. But he tried to help his friend anyway.

During those two years, Ancona spent his after-hours and weekends helping his friend to draw up a business plan for the day-care centre.

“From planning for a day-care centre, it turned out to be something even more fun and bigger that could attract an even larger crowd,” Ancona says.

So, the first KidZania theme park was opened in Mexico City in 1999. It was an instant hit, and Ancona has never turned back. There are currently two KidZania theme parks in Mexico, including one in Mexico City that attracts an average of 800,000 visitors annually. A third is currently under construction. The concept has also been licensed and franchised to operators in Tokyo and Osaka in Japan; Jakarta, Indonesia; and Lisbon, Portugal.

Healthy activities

KidZania is a “nation” just for children. Targeting those between two and 12, it is an educational and entertainment centre that allows children to role-play adult activities in a replica city designed to imitate real-life and a functioning economy.

What’s even more interesting is that this “nation” has an official currency called kidZos. Children can earn kidZos by working in KidZania, and they can use the currency to pay for the goods and services there. They can also save their money and earn interest from their savings in the “banks” in KidZania.

Ancona believes that parents would like the concept of KidZania, as the programmes in the theme park have been designed to instil positive values in children.

The experience in KidZania is aimed at helping children learn faster about the adult world and how a real city works.

The programmes also help children to develop a sense of vocation as they get to try out the various occupations available at KidZania.

KidZania offers more than 60 professional roles, including pilot, doctor, teacher and journalist, for children to play. But given the limited time of five hours per entry, a child can usually play between five and 10 roles a day. Hence, there is a repeat factor for the children to come to the city again to try out other roles.

According to Ancona, the programmes at KidZania are changed regularly so that there is always something new for the children to experience each time they visit the theme park.

It also has a loyalty programme, whereby children can apply for “citizenship” and be KidZanians. As citizens of KidZania, the children will get a “passport” and enjoy various benefits such as income tax incentives.

Ancona believes that the experience in KidZania would also help children learn about the value of money, and how they have to work hard to earn a living, as well as the importance and benefits of savings.

He says children would also be able to pick up social skills through their interaction with other children in the theme park and learn to make their own decisions.

Ancona reveals that the bulk of the people working in KidZania are mainly the supervisors who have to monitor and guide the children.

“It requires special skills to be a supervisor at KidZania, and we take a long time to select the right people for the job,” he says.

Among the values that he looks in people applying to be a supervisor at KidZania are patience, service orientation and passion for children.

Generally, the KidZania theme park is targeted mainly at the local market, with an ideal composition of 70% local residents and 30% outstation or foreigners.

KidZania’s business has remained fairly resilient through the current economic challenges, owing to the fact that it focuses on the local market, Ancona says.

In recession, most people tend to turn to nearby locations for leisure and entertainment, as they cut down on travelling, he explains.

In addition, the entrance fees for KidZania theme parks are quite affordable, though they vary by countries.

However, Ancona acknowledges that the recent outbreak of the A (H1N1) influenza virus had a negative impact on KidZania’s business in Mexico when the theme parks there had to be closed temporarily.

Nevertheless, it is back to business as usual now in Mexico, he says.

Global brand

KidZania brand is growing fast internationally. He, however, did not reveal how much the business is worth today.

This year will also see the opening of KidZania theme parks in Dubai, the United Arab Emirates, and Seoul, South Korea.

Over the next two years, KidZania theme parks will be opened in Cuicuilco, Mexico; Shanghai, China; Bangkok, Thailand; Santiago, Chile; Istanbul, Turkey; and either Delhi or Mumbai in India. Malaysia will also have a KidZania theme park by 2012.

Most of these expansions have been through franchise programmes.

Ancona explains, “We want to partner the local organisations because they understand the local market better than us.”

As for the ticket pricing structures, Ancona reveals that they are usually determined by KidZania’s franchisees.

“We only make proposals based on the socio-economic levels of the local markets of our franchisees, but the decisions are ultimately in the hands of our local partners,” he explained.

Meanwhile, there is also a plan to open KidZania in the US after the next two years.

“The US is the biggest market in the world for any type of entertainment but it is also a very tough market. You only have one chance to do it right,” Ancona explains, adding that he wants to make KidZania a global brand first before setting its foot in the United States.

By The Star (by Cecilia Kok)

Malaysia fits well into KidZania’s expansion

The Malaysian market fits well into the expansion plan of KidZania, says its founder and president Xavier Lopez Ancona.

As long as there are at least 700,000 children in the city, we would deem it a worthy investment, he adds.

What’s more, Kuala Lumpur is an important international tourist destination that attracts more than 20 million foreigners every year.

KidZania Kuala Lumpur is scheduled to be open to the public in early 2012. The brand has been franchised to a joint venture between Khazanah Nasional Bhd and Boustead Holdings Bhd through their newly established Rakan Riang Sdn Bhd, in which the former holds an 80% stake and the latter holds 20%.

The RM50mil project to be located in Mutiara Damansara, Petaling Jaya, marked Khazanah’s second investment in theme parks for the country, after its earlier investment of RM750mil for the development of Legoland in Iskandar Malaysia. It also represented Khazanah’s increasing focus on leisure and tourism sector as it has identified significant development opportunities in the area. The KidZania theme park is expected to be a lucrative investment as it is the first-of-its-kind in the country.

With its strategic location in the high-density township of Mutiara Damansara, the theme park is set to draw in a huge crowd every year. The venture would generate two streams of income – one from the visiting patrons and the other from its marketing sponsors.

Taking the entrance fees of US$12 (RM42) per child for KidZania Jakarta as a guide, the venture could generate at least RM20mil from the ticket sales per year if the target of 500,000 visitors per year is achieved.

The ticketing revenue would be on top of other operating revenues, which would come from fees paid by its marketing partners who have set up their brands in the theme park as well as from food and beverage sales.

Hence, Khazanah is confident of recouping its investment in KidZania Kuala Lumpur in less than five years.

As for Boustead, the joint-venture agreement with Khazanah would not have any material effect on the company’s net assets, gearing and earnings for the financial year ending December 2009, according to its recent announcement to Bursa Malaysia.

ECM Libra in its recent report viewed the recent development as a boon to the Mutiara Damansara township developed by the Boustead group. Its analyst said the upcoming KidZania theme park would increase the property values around the township and draw more visitors to The Curve shopping mall.

The analyst thought KidZania was a clever concept as it provides real-life experience of adulthood for children and an opportunity for other corporations to market their brands. For instance, the KidZania theme park in Jakarta has sponsors the likes of AirAsia, Sony, Hewlett Packard and Sunsilk.

By The Star

S&P lifts KLCI’s year-end target to 1,150

S&P's top property picks are Sunrise, Mah Sing, KSL Holdings and Selangor Properties, and it favours Public Bank, AMMB Holdings and RHB Capital for banks

Standard & Poor's Equity Research has raised its year-end target for the Kuala Lumpur Composite Index to 1,150, saying that a potential economic recovery in the last quarter this year may boost bank's earnings.

Its top picks for banks are Public Bank, AMMB Holdings and RHB Capital.

S&P is putting its next year's KLCI target at 1,300, indicating a 21 per cent potential upside. The benchmark index closed at 1075.77 yesterday.

It expects the US economy to return to a 1 per cent expansion in the final quarter as housing prices and home sales bottom out, and has projected a better economic performance in Malaysia than the official estimates. The various stimulus plans by governments in Asia will work to lift economies in the region, S&P head of Asia equity research Lorraine Tan said.

It expects Malaysia's economy to shrink 3.3 to 3.5 per cent this year, better than the government's projection of a 4-5 per cent contraction.

"Like in most parts of Asia, the worst in Malaysia's GDP (gross domestic production) has probably been seen in the first quarter. The second quarter GDP is probably still down from last year, but there will be some pick-up," Tan said at a media briefing in Kuala Lumpur yesterday.

Still, the second half could be more challenging for Malaysian stocks, since the market has already priced in a fair bit of corporate activity improvement next year.

"At this juncture, there is risk to the 2010 corporate earnings outlook, should rising interest rates, tax rates and a weak US dollar continue to dampen US consumption and slow Asian and Malaysian export recovery," Tan remarked.

S&P has projected Malaysia corporate earnings to grow again next year at 11.7 per cent. This year, it expects companies to report 13.7 per cent earnings contraction.

"We remain positive over the mid-long term on stocks but the short term is subject to further consolidation," she said.

Apart from banks, it also likes property stocks, saying that it expects demand to stay firm because the record low mortgage rates are providing more incentives to buy house than to rent.

Malaysia's real estate prices are also among the cheapest in the region, S&P said. Its top property picks are Sunrise, Mah Sing Group, KSL Holdings and Selangor Properties.

Investors may find opportunity to pick up shares of energy and materials, like steel and cement, when market dips in the near term, S&P said. However, it remains wary of autos, airlines and shipping stocks.

By Business Times (by Chong Pooi Koon)