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Wednesday, June 30, 2010

MPHB diversifies into property development for additional income

PETALING JAYA: Multi-Purpose Holdings Bhd (MPHB) will be announcing its joint venture (JV) with a public-listed developer in the next several weeks to mark its entry into the property development sector.

MPHB MD Datuk Lau Kim Khoon pointing the way forward for the company: It is in property development. He says ‘We do not have the expertise but we have the land'. So a joint venture with someone who has the expertise is the answer to increase profit.

MPHB is known for its gaming business from which it generates about half of its profit via 51%-owned Magnum Corp, one of Peninsular Malaysia’s three legal number forecast operators,

Managing director Datuk Lau Kim Khoon @ Surin Upatkoon said the group was entering the property development sector in order to have an additional income stream and “to build a sustainable recurring income model.”

Besides gaming, its other businesses are insurance, stockbroking, property and hospitality.

The group is starting from ground zero in property development as other than its two residential projects which it launched early this year in Penang, it does not derive any revenue from property development.

The group has two office buildings, Menara Multi-Purpose and Plaza Flamingo, and two hotels under the Flamingo brand as investment properties. Menara Multi-Purpose is 98% occupied and Plaza Flamingo, 90%.

“In the past, MPHB has been factoring in the recurring income from these assets but the contribution was not substantial. The current contribution to the group’s revenue from property development comes mainly from two residential developments in Penang which are expected to contribute a total of RM37mil in profit before tax when completed in the next three years,” said Lau.

The Paya Terubong project is a six-acre joint venture comprising 116 units of town houses and 256 apartment units with a gross development value (GDV) of RM72mil. The Minden Heights project is another JV comprising 74 units of terrace houses under phase 1, launched early this year, and 95 units of terrace houses under phase 2, which will be launched at the end of this year. The GDV for this project is RM143mil.

The group is also converting Magnum Plaza into a three-star hotel to be part of its Flamingo chain. This is expected to open next year.

The jewel in the crown, Lau said, would be its RM3bil iconic integrated mixed development project at the junction of Jalan Sultan Ismail and Jalan Imbi near Park Royal Hotel, which is currently in the planning and designing stage.

It was reported last week that MPHB will launch a RM3bil project which will complement the Government’s proposed international financial district and Pasar Rakyat redevelopment in Imbi. The 2.4ha will have a retail podium, a 50-storey luxury condominium, a 35-storey four-star hotel and 30-storey office tower. The entire project will take several years.

“We believe our project in downtown KL is in line with the Government’s vision for KL. For this reason, we view the various ongoing projects by the Government and existing developers to be complimentary to our project, which would in turn strengthen other projects in the area.”

On the occupancy prospects of its KL integrated mixed development in view of the weak global economy and dwindling expatriate community, Lau said MPHB’s projects were not designed exclusively for expatriates but for the working class.

Only a small portion will be condominiums, as such occupancy and oversupply will not be an issue, he said.

“We do not have the expertise but we have the land. So we will work with the parties that have the expertise. It is not necessary to have our own property team to undertake these developments. The objective is to build a sustainable recurring income stream from our investment properties,” he said.

Lau said most of its land were bought and paid for years ago. Over the years, they have appreciated by three- or four-fold.

He said property development and investment is expected to contribute 10% to the group bottomline.

“Revenue from the property sector will contribute between 20% and 25% in about three to four years’ time,” he said.

“We are of the view that the local economy is stable and not directly affected by the fragile global economy. We are also taking a long-term view of the sector and the group will consider the overall economic climate and other factors when deciding on the timing of launches.”

He said the bulk of its landbank, which includes a 4,641-acre oil palm estate in Pengerang, Johor, which is near the third link to Singapore, are generally more suitable for the local market.

By The Star

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