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Thursday, September 24, 2009

AMDB unit buys 60% in UK property firm

KUALA LUMPUR: AMDB Bhd hopes to penetrate the property market in Britain via wholly-owned unit Walleng Enterprise Sdn Bhd, which has subscribed for 60% in Westlink Global Investment Ltd (WLG).

In a filing with Bursa Malaysia yesterday, AMDB said Walleng had subscribed for 60 ordinary shares of £1 each in WLG, representing 60% of the issued and paid-up share capital of WLG at par for £60 cash.

WLG would become an indirect subsidiary of AMDB upon completion of the subscription.

Following the subscription, Walleng has committed to provide shareholders’ advances to WLG of up to £13.5mil (RM80mil).

“Due to the contraction of the global economy, the subscription in WLG represents a timely opportunity for AMDB to enhance shareholders’ long-term value by penetrating and gaining access to the property market in Britain,” it said.

AMDB said due to the financial crisis, property values had dropped significantly and fundamentals showed it was now the right time to invest in the London property market, which offers prime properties in a highly liquid market.

WLG has entered into a sale and purchase agreement with LS Victoria Properties Ltd to purchase a property located in London for £50.5mil.

The property comprises two freehold office buildings known as 40 and 50 Eastbourne Terrace located in Paddington.

“The property provides a net lettable space of 146,000 sq ft of retail and office accommodation which are currently let to a variety of tenants with about 94% occupancy. Based on current rentals from the tenants, the net rental yield on the property is 8.65%,” AMDB said.

In a separate statement, AMDB said wholly-owned subsidiary AMDB Technics Sdn Bhd has entered into a sale and purchase agreement with SGB-SMIT International GmbH to dispose of 35% of equity interest of AM SGB Sdn Bhd for RM31.2mil cash.

AMDB Technics would cease to be a shareholder of AM SGB upon completion of the disposal.

AMDB is expected to record a gain on disposal of about RM9.7mil from the disposal based on the carrying value of RM21.5mil as at Aug 31.

It would utilise RM21.2mil from the proceeds to repay its borrowings, RM10mil as working capital and the balance for expenses for the disposal.

By The Star

China home prices to ease, boding well for economy

BEIJING: Chinese housing prices have surged since March, but they will soon lose momentum and even start to fall around the end of the year, boding well for a more sustained contribution to overall economic growth, according to Reuters.

A burst of lending in the first six months helped fuel a wave of pent-up end-user buying and speculative purchases, driving up prices for some projects in major cities by 20-30 percent and creating concerns about dangerous bubbles.

Speculative transactions are subsiding now; at the same time, a fresh round of property investments will increase supply.

The resulting moderation in prices, far from signalling the next phase of a boom-bust cycle, will probably pave the way for steadier demand from owner-occupiers, providing a valuable prop for an economy adjusting to a slump in exports, analysts say.

"First we see transactions fall, then prices will decline," said Ge Haifeng, deputy head of data research at the Beijing-based China Real Estate Index System, which is affiliated with, China's biggest property website.

Transaction volumes in Beijing, for instance, fell 5.6 percent in August compared with July, the second straight fall after a four-month streak of gains, according to the city's housing management bureau. In the eastern port city of Ningbo, they were down 37 percent.

That has not been by chance.

Worried by the spike in house prices, authorities in Beijing, Shanghai and other major cities attempted to curb speculation by introducing measures in July to make it harder for people to apply for second mortgages.

Such moves will increase the cost of buying a home and push down prices, said Fan Jianjun, a senior researcher at the Development Research Centre, a government think tank.

The drop in new bank lending -- to an average of 383 billion yuan ($56 billion) in July and August compared with a monthly average of over 1.2 trillion yuan in the first half -- will also pull down transactions in the coming months, said Gao Shanwen, chief economist at Essence Securities.

Policy tweaks and slower lending will probably be enough for now, analysts say, allowing Beijing to stop short of declaring a full-fledged campaign to stamp out property speculation similar to one in 2007.

Ge projected that housing prices would drop towards the end of 2009 or early next year, by about 10 percent, much less than a 20-30 percent fall witnessed last year.

Song Li, a senior analyst at Centaline Property Research Center in Shanghai, gave an even bolder forecast: "We expect prices to peak in September."

Andy Rothman with brokerage CLSA in Shanghai disagreed that the recent burst of buying and price increases made the sector vulnerable to a setback. He said the market was growing at a healthy, sustainable pace, driven by fundamental demand.

"In our view, we are in the early stages of a long-running, moderately paced inflation cycle in residential real estate prices in China," Rothman said in a report.

Rothman saw a risk that increasingly tight supply could drive prices up too fast, but figures on housing starts and investment suggest that danger is unlikely to materialise for now.

The recent recovery boosted developers' confidence so much that many are replenishing their land banks. Some, like China Vanke Ltd, Gemdale Corp and Poly Real Estate Group Co, have rushed to raise money for future expansion.

Nationwide, real estate investment rose almost 35 percent in August compared with a year earlier. The growth rate in July was 20 percent and just 1 percent in January and February.

The government also appears determined to avoid supply bottlenecks as more people look to buy their own homes.

The Ministry of Land and Resources said last month it would carry out checks on land that is lying idle, sending a warning to developers to either quicken their CONSTRUCTION [] plans or hand back the plots to the government.

Beijing is unlikely to clamp down any harder in the near term given the importance of a healthy property sector to the overall economy, said Tao Wang and Harrison Hu with UBS in Beijing.

Building houses creates demand for materials and labour as well as for appliances and furnishings, stimulating consumption.

"We think the recent strong momentum in property sales may taper off somewhat in the coming months," they wrote in a report.

"Nevertheless, we think the construction and investment in the property sector will continue their path of recovery. While we expect more piecemeal measures to prevent housing prices from rising too rapidly, we do not expect an overall tightening."

By Reuters

LRT extension a boon to construction sector

PETALING JAYA: Analysts are generally more bullish on the construction sector since last week’s announcement that state transport firm Syarikat Prasarana Negara Bhd has been given the nod to extend the Kelana Jaya and Ampang light rail transit (LRT) lines, estimated to cost RM7bil.

A local analyst said the project would have significant and positive impact on the sector, create spin-offs to boost employment, besides helping to ease traffic congestion.

“The extension of the Kelana Jaya and Ampang LRT lines will also help increase the value of properties along the lines,” he told StarBiz.

He said it was not uncommon for properties within walking distance to the LRT stations to appreciate, but it also depended on the location.

“These properties located near LRT stations are definitely more easy to rent as people can opt for an alternative mode of transportation, to driving.”

He also said the extensions, slated to be completed in three years, would serve the transport needs of those living or working further from the Kuala Lumpur city centre, thereby easing congestion and improving transport efficiency.

At this moment, it is unclear whether Prasarana, a wholly-owned unit of Ministry of Finance Inc, will award the entire project to one company or a consortium of companies.

“Many leading construction companies are definitely eyeing a major slice of the cake,” the analyst said.

An analyst with OSK Research also concurred that the extension lines would help lift property prices, especially for properties near the stations.

He said prequalification tenders for the construction of the extension lines were expected to be called next month and contracts awarded only from early 2010.

“This, we reckon, is very timely as the estimated completion of the extension lines by early next decade will likely coincide with the expected boom in the mass to mid housing market, thus giving many of the townships along these upcoming LRT lines the leverage to ride on the next major upcycle,” he said.

The Kelana Jaya line would extend from the Kelana Jaya station to Subang Jaya and USJ, before ending in Putra Heights.

A total of 13 stations will be located along the 17km Kelana Jaya extension. There will also be an interchange at the existing KTM line located behind Carrefour in Subang Jaya.

The analyst said the extension would serve the densely populated and mature townships such as Subang Jaya and USJ.

“There is a sizeable student population within the enclave and its vicinity as it houses a number of colleges and universities, such as Taylor’s College, INTI College and Metropolitan College,” he said.

The analyst said the Ampang extension line would start from the existing Sri Petaling station, pass through Bandar Kinrara, Bandar Puchong Jaya and Bandar Puteri Puchong before ending in Putra Heights.

The 17.7km Ampang extension will also have 13 stations. Both the Kelana and Ampang extension lines will connect at an interchange in Putra Heights.

The OSK analyst said in contrast to the Kelana Jaya extension line, the Ampang line would pass through many new but fast growing townships in the south-east of the Klang Valley.

Foreign research house Credit Suisse said in its Sept 14 note that the rollout of this RM7bil project was the next major catalyst for upward re-rating of the construction sector in the country.

By The Star (by Danny Yap)

US home loan demand at highest since late May

NEW YORK: US mortgage applications jumped last week to their highest since late May as interest rates tumbled below 5 per cent, data from an industry group showed yesterday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, both purchase and refinance loans, for the week ended September 18 increased 12.8 per cent to 668.5, the highest level since the week ended May 22.

While consumers clamoured for home refinancing loans, their appetite was also robust for applications to buy a home.

By Reuters

Sunway City secures RM600m loan

Property developer Sunway City Bhd has taken a RM600 million loan from four local banks.

Sunway City will use RM240 million to refinance existing commercial papers and medium term notes, RM200 million to refinance existing bank guaranteed bonds, and the remaining RM160 million to partly finance the company’s capital expenditure and working capital

By Business Times