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Tuesday, August 31, 2010

Sime re-looks property joint ventures

PETALING JAYA: Sime Darby Bhd is taking a re-look at some of its property joint ventures and, where possible, is seeking to unwind out of ventures that do not create maximum value for itself. It is also in no hurry to list its Indonesian plantation arm, as was earlier speculated, preferring to enhance efficiencies before such an exercise.

“Sime Darby periodically reviews investment projects including joint ventures to ensure that they are still in line with the group’s strategic objectives and that the projects are giving Sime Darby the maximum val ue,” Sime Darby said in an email reply to questions from StarBiz.

When asked if Sime Darby would cease to enter into new property joint ventures, it said it “will still consider forming joint ventures with reputable players as long as the value creation from these ventures exceed that which would have been created by Sime Darby on its own and meets our targeted returns. Furthermore, such ventures must be able to enhance our own capabilities.”

On the listing of its Indonesian plantation arm, Sime Darby said: “The group is still currently focused on enhancing its operational efficiencies in its plantations division and would only consider unlocking its asset value via a listing process after it has fully enhanced the yield potential of its estate and mill operations.”

Earlier this year, it had been speculated that Sime Darby was planning a listing of its Indonesian plantations on the Jakarta Stock Exchange next year.

Following the mega merger that completed in November 2007, Sime Darby inherited Kumpulan Guthrie and Golden Hope’s Indonesian plantations.

Sime Darby has more than 200,000 ha of planted area in Indonesia.

However, it is understood that CEO Datuk Mohd Bakke Salleh is not in a hurry to pursue such a listing, hoping to increase the yield from the plantations there in order to derive a better valuation before a listing is pursued.

According to reliable sources, some of Sime Darby’s property joint ventures that may be studied closely by Bakke and his team are believed to include the RM1bil development in Shah Alam with Sunrise Bhd and other ventures formed with the Brunsfield Group.

The 50:50 joint venture with Sunrise was inked in January to develop 21 acres in Bukit Jelutong to consist of retail, shopoffices, officesuites and serviced apartments.

The 60:40 joint ventures with the Brunsfield Group had been done earlier, since 2006, to develop property projects such as Subang Avenue, Oasis Damansara and the redevelopment of Oyster Cove, an exclusive waterfront resort on Australia’s Gold Coast.

These projects had been questioned before, on the basis that Sime Darby is likely to be able to extract more value if it carried out the developments itself.

Sime Darby’s property division enjoyed a 28% profit margin last year and some analysts said that the division could have reaped a much higher ma rgin. This is considering that its land cost is typically lower than that of most other property developers.

CIMB analyst Ivy Ng, in a note published yesterday, said that Sime Darby was relooking its property joint ventures. “

(Sime Darby’s) thinking is to review and unwind joint ventures where possible to maximise the property development profit of its valuable landbank. This is a departure from the previous management which planned to accelerate the development of the land through sale or joint venture.”

Ivy added: “The new CEO believes that Sime Darby has a strong property brand name and intends to build the group’s property expertise to encompass all the types of property development projects."

By The Star

S'pore moves to cool record property prices

SINGAPORE: Singapore moved yesterday to discourage short-term speculative real estate investing as property prices soar to record highs amid a rapid economic recovery.

Bank loans for second homes will now be limited to a maximum of 70 per cent of the value of the property, down from 80 per cent previously, the National Development Ministry said. The government will also impose a tax on houses sold within three years of purchase, up from one year.

"The property market is currently very buoyant," the ministry said in a statement. "The government has decided to introduce additional measures now to temper sentiments and encourage greater financial prudence among property purchasers."

Prices of private residential housing rose to a record high in the second quarter, fuelled by a surging economy that expanded 18 per cent in the first half as manufacturing rebounded from last year's global recession.

Prices of public housing, where 80 per cent of Singaporeans live, have risen five straight quarters to record highs.

"The frothy sentiment has spread to the public housing market," said Wai Ho Leong, an analyst with Barclays Capital.

Leong said a surge in residential units planned and under construction will boost supply and help dampen prices.

Singapore's low crime rate, good schools and low personal and corporate taxes have helped the island rank near the top of expatriate global quality-of-life surveys and attracted investors to the residential and office property markets.

"Should economic growth falter and the market corrects, property buyers could face capital losses, with implications on their own finances and the economy as a whole," the ministry said. "The current low-global interest rate environment will not continue indefinitely."

The government earlier this year imposed a 1 per cent to 3 per cent tax on residential properties sold within one year of purchase and lowered the loan-to-value limit to 80 per cent from 90 per cent on loans for private housing. Officials have also pledged to release more government land for real estate development to help boost housing supply.

Private residential property prices rose 11 per cent in the first half, the ministry said.

"We've twice acted to cool the property market, once last year and once in February this year, but the prices are still rising," Prime Minister Lee Hsien Loong said in a speech on Sunday. "I think we need to do more."

"The latest measures are motivated largely by the unabated rise in public housing prices," an analyst said, noting the 4.1 per cent increase in HDB resale prices in the second quarter exceeded the average of about 3.0 per cent in preceding periods.


Deferred IFRIC 15 brings relief

PETALING JAYA: The Malaysian Accounting Standards Board (MASB) has deferred implementing the much-debated accounting practice that recognises developers’ revenue only on completion of projects to 2012, MASB announced on its website yesterday.

Under the current system, developers report profits progressively.

The new ruling under the International Financial Reporting Interpretations Committee (IFRIC) 15 is deferred to Jan 1, 2012 after much deliberation among property players and accounting associations and the Securities Commission (SC).

Datuk Michael Yam

MASB said the deferment was necessary to enable further deliberation on how the move would affect the property sector. It was supposed to have been implemented on July 1 but met with opposition from developers.

The deferment would give MASB the opportunity to get more feedback from industry players on a proposed new standard on revenue from contracts with customers, MASB said.

“The proposed new standard, anticipated to subsume IFRIC 15 requirements, is expected in the middle of next year,” MASB said.

The proposed IFRIC 15 has been met with criticism from local property players.

Real Estate and Housing Developers’ Association Malaysia (Rehda) president Datuk Michael KC Yam said he was pleased that the proposed ruling had been deferred.

“That’s good news. It would have been detrimental had it not been deferred,” he told StarBiz.

In April, Rehda wrote to the MASB seeking clarification on the implementation of IFRIC 15, given the current legal framework and practices in Malaysia.

Rehda also set up a task force, assisted by accounting and legal experts, to address issues arising from Malaysia’s adoption of the IFRIC 15.

Yam said the reason for the IFRIC 15 was to have a standard system worldwide that people could understand. However, he said, the current system in Malaysia “reflected the current process on the ground.”

“Our (Rehda’s) stand is that the ruling was too much of a reflection of the system practised in Europe and America where only upon (project) completion does the developer get to recognise profits.

“Our system has always been based on progressive profits. This is recognised under the Housing Development Act, a legislation recognised by Parliament,” he said. “There are valid and bonafide differences between both systems.”

Yam said Rehda had subsequently engaged in a series of meetings and discussions with MASB, the Malaysian Institution of Accountants and the SC to recognise the fact that the existing system was unique and that more time was needed before a final decision was made to implement the IFRIC 15.

MASB also said on its website that it had hosted a special forum on Aug 16, and noted that the primary business model of the real estate industry in Asia, namely the “sell and build” concept, might be different from real estate business models employed in other jurisdictions.

“Therefore, it would be timely and more productive for stakeholders to analyse and provide timely input to the IASB (International Accounting Standards Board) for consideration before they finalise the standard on revenue from contracts with customers,” it said.

Yam said he hoped the system that would be implemented in 2012 would be a modification of the IFRIC 15 in some way.

“I hope that by 2012 there will be some changes to what was supposed to be implemented initially. Our system is not perfect. We need to study other standards to come up with a suitable one,” he said.

By The Star

PKNS to enter REIT industry

PETALING JAYA: Selangor State Development Corp (PKNS) will be signing a series of agreements to mark its entry into the real estate investment trust (REIT) industry.

The signing ceremony is scheduled for Thursday. PKNS’ prime properties will be put under the PKNS REIT.

News of the company’s plan to go into the REIT business emerged last year but attempts by StarBiz to gain more information from PKNS were unfruitful.

Reports earlier had stated that PKNS was negotiating to buy a controlling stake in a listed REIT with total assets worth more than RM600mil. Its general manager, Othman Omar, declined to name the REIT.

He said PKNS wanted to enter the REIT market in order to grow. It would also enable PKNS to leverage on its stable of properties by doubling its value to over RM1bil.

It would be putting Wisma PKNS, Kompleks PKNS, the 500,000 sq ft Shah Alam City Centre mall and the Shah Alam convention centre into the REIT.

PKNS still has some 12,000 acres of landbank in Selangor, strategically located in such areas like Setia Alam, Bukit Cerakah, Gombak and Klang.

It has vast experience in mixed development comprising offices, retail, hotel and serviced apartments, having developed among others the SACC Mall in Shah Alam and Menara PKNS in Petaling Jaya.

By The Star

Banks likely to be against mortgage proposal

Banks may not be in favour of a potential move by Bank Negara Malaysia to tighten mortgage lending rules unless it is limited to just high-end properties, analysts say.

It was reported that the central bank is seeking feedback from banks on the possibility of capping the loan-to-value ratio (LVR) for mortgages at 80 per cent to avert the risk of a potential property bubble.

Currently, there is no fixed LVR. Banks usually lend up to 90 per cent of a house value, or even up to 100 per cent in some cases.

"Banks are unlikely to be in favour of it as it will affect their profitability," said a banking analyst at a local research house.

Still, BNM is likely to be mindful of this and if it feels that such a move is necessary to curb property speculation and a potential rise in non-perfoming loans, it may reach a compromise in that it may not slap the 80 per cent cap across the board, he pointed out.

"We believe that it is unlikely that BNM will enforce a strict capping of LVR ... across all residential property classes, but rather impose a restriction only on higher-end properties where the speculative element could be more apparent," OSK Research said in a note to clients yesterday.

Kenanga Research said it wouldn't be surprised if BNM implemented the 80 per cent cap on, at least, properties valued at more than RM500,000.

The central bank's concerns about a potential bubble are warranted, nterest rate hikes this year, loan growth has remained robust while deposit growth has lagged, due in part to the channeling of retail deposits into property purchases.

Residential properties currently account for 26.6 per cent of total industry loans.

Still, OSK felt that it was not feasible to set a blanket enforcement on the LVR, pointing out that residential properties were considered one of the safer asset classes for banks to lend to, with promising growth prospects underpinned by the country's relatively young population.

As it stands, it is understood that most banks already have an internal risk control policy, limiting the LVR to 85 per cent for higher-end residential properties valued at more than RM700,000. Most banks also have a LVR cap of 85 per cent for non-residential properties.

OSK noted also that LVR was just one of several criteria that banks use in their credit scoring process. They also tend to look at the debt servicing ratio, location of property and the borrower's other financial backing.

Meanwhile, any mortgage restriction is also seen to be negative for the property sector. Kenanga Research said it is likely to downgrade the sector from a "trading buy" now if the restrictions are implemented as property transactions will fall since deposit requirements will basically double.

"If the LVR is official at 80 per cent for all borrowers, we see a negative impact on the property sector, especially on the low- to medium-end market as housebuyers will need more equity under the new scheme," said Maybank Investment Bank research.

For example, a housebuyer would need RM80,000 instead of RM40,000 as equity for a RM400,000 house. "This could cause a delay in purchasing decisions," it noted.

RHB Research, meanwhile, felt that first-time home buyers should be exempted from a higher downpayment ratio since the government has been encouraging home ownership.

By Business Times

No decision on Menara Olympia

PETALING JAYA: Olympia Industries Bhd is yet to make a decision on the fate of its Menara Olympia property located along Jalan Raja Chulan in Kuala Lumpur following the decision by Jelita Timur Sdn Bhd to abort the acquisition.

Olympia’s corporate communications senior manager Jennifer Chow said in an email reply to a StarBiz query that the board of directors “has yet to make any decision following this announcement”.

The company had on Aug 26 received a letter from Jelita Timur, which highlighted the uncertainties over the acquisition, including the delay on Olympia’s part in obtaining the requisite approvals for the transaction.

Jelita Timur, in the letter, had also said that it was not prepared “under any circumstances” to proceed with the transaction at a higher consideration.

Following a second valuation of the property by Rahim & Co as directed by Bursa Securities, Olympia’s board had announced last Friday that the property was valued at RM228.1mil.

Collier, Jordan Lee & Jaffar Sdn Bhd valued the property at RM202.65mil in January, which was deemed low by analysts.

Olympia’s board said yesterday in an announcement that there was a unanimous agreement to mutually abort the transaction to avoid the possibility of being sued for specific performance and higher compensation sum for breach of obligations under the sale and purchase agreement (SPA), which was signed on April 9 and would fall due by Sept 9.

The board added that the timeframe for the completion of the SPA was unlikely to be achieved after taking into consideration the Sept 9 deadline and the uncertainties.

By The Star

EPF to invest RM4.88bil in UK properties

PETALING JAYA: The Employees Provident Fund (EPF) will invest £1bil (RM4.88bil) in properties in the UK, the pension fund said in a statement yesterday.

“The investments would be for long-term with expected annual yield of 6% to 7%,’’ the statement said.

The fund did not identified any specific property.

The statement came in response to a UK news report published on Sunday that said the EPF had appointed ING Real Estate Investment and Deutsche Bank’s property investment arm RREEF to manage the £1bil investment.

They will each invest £500mil in European property markets, focusing on the UK.

Several significant stakeholders urged the EPF to be careful in handling the venture.

MTUC president Syed Shahir Syed Mohamud said such a big move by the fund would have already gone through a deliberate process and consultations with experts.

“However, acting cautiously will also see slower or smaller returns with less dividends annually.”

Fomca secretary-general Muhd Sha’ani Abdullah said EPF must be held accountable with the venture, adding that deals should not be made secretly.

“Every deal should be immediately announced. Huge investments usually means bigger risks.

“We have seen how highly successful organisations like Lehman Brothers had collapsed due to mismanagement. EPF must be very transparent and careful,” he added.

As at March 31, EPF’s total fund size was reported to be at RM402bil, most of which are invested in local bonds and equities.

Currently, less than 1% of EPF’s total accumulated fund is invested in properties, well below the fund’s strategic asset allocation target of 5% for properties.

“The EPF is desirous to bring this percentage up,’’ EPF said in the statement. But there are valid concern about “crowding out” the market if the EPF uses its massive fund to snap up local assets.

Such diversification into foreign asset play would also allow the fund to better manage its risk-return profile.

In April, EPF’s chairman Tan Sri Samsudin Osman said the pension fund needed to invest more overseas to boost returns and keep annual dividend above the guaranteed 2.5% rate.

It was reported that the EPF had set aside RM10bil for investment in overseas equities and global bonds.

EPF said the fund strictly adheres to its strategic asset allocati on designed to maintain consistent returns in the long run within tolerable risks limits for each asset classes.

“Even with (the £1bil) investment in the UK, the percentage is still well below the EPF’s strategic asset allocation for properties,’’ EPF said.

The EPF said it had zeroed in on the UK property market because that is one of the largest property market in the world backed by a strong Lands Law protecting landlords.

“The stable and highly liquid UK property market underlies the rational behind the move,’’ it said.

The EPF said that although it had a policy to pursue overseas investments, the fund is also “aggressively exploring the market” in Malaysia.

Among local properties owned by EPF includes that Sogo Building, Wisma KFC, MAS training Centre, Giant-operated supermarket outlets and CIMB branches.

By The Star

New low cost carrier terminal to cost more

Prime Minsiter Datuk Seri Najib Tun Razak signing on the plague after the ground breaking ceremony at the beginning of the construction of KLIA2 yesterday. Transport Minister Datuk Datuk Seri Kong Cho Ha looks on. - Starpic by Chan Tak Kong

SEPANG: Malaysia Airports Holdings Bhd (MAHB), which had an initial budget of RM2bil to build the new low-cost carrier terminal (LCCT) may have to pay more for the terminal due to delays in placing out contracts.

Managing director Tan Sri Bashir Ahmad Majid said there were still some contract packages that were yet to be finalised.

“We see this as good delay because MAHB wants to ensure it gets the right contractors at the most affordable price,” Bashir told reporters after the ground-breaking ceremony for the new LCCT yesterday.

However, he declined comment on the additional cost.

The new terminal, to be known as KLIA2, is expected to be funded by MAHB’s proposed sukuk (Islamic medium-term notes programme of up to RM3.1bil and commercial papers programme of up to RM1bil).

With KLIA2 and the 39 airports that MAHB currently managed in Malaysia, the airport operator would be able to handle at least 60 million passengers annually by 2014, Bashir said.

“KLIA2 is expected to handle 45% to 55% of the (total number of) passengers, mainly budget travellers,” Bashir said.

Located 2km from the current main KLIA terminal building, KLIA2 is slated to be completed by April 2012 and would be the largest LCCT in Asia with an initial handling capacity of 30 million passengers.

Bashir said over the past 10 years, low fare travel had grown and today constituted 16% of total travel in the Asia-Pacific region and 43% in Malaysia, and this percentage was expected to increase.

The 242,000 sq m new terminal is four times bigger than the current LCCT, which occupies 60,000 sq m and can only handle 15 million passengers yearly.

On the aerobridge, Bashir said MAHB was in favour of building it but would leave the decision to the budget airlines as they feared it might impact turnaround time for their planes. He added that besides the turnaround consideration, there was also a charge of RM85 for each plane using the aerobridge.

On the new terminal’s interconnectivity, Bashir said KLIA2 would be connected by buses and express rail link.

“There are plans for railway connection in time as well,” he said.

By The Star

Monday, August 30, 2010

UDA aims to enhance its property value

It is better not to have a fixed quota for Bumiputera properties, but yet maintain the Bumiputera agenda for it to be an effective business model, says UDA chairman

Government-owned UDA Holdings Bhd's priority for the long term is to enhance the value of its properties with an optimum Bumiputera and non-Bumiputera mix of buyers and tenants to ensure their appreciation.

Newly-minted UDA Holdings chairman Datuk Nur Jazlan Mohamed said the organisation needs to change its concept of promoting mainly Bumiputera interest to ensure a favourable mix with higher purchasing power in order to be a profitable developer.

"We need to change the expectation that properties developed by UDA are 100 per cent, or even 80 per cent, for Bumiputeras.

"It is better not to have a fixed quota for Bumiputera properties, but yet maintain the Bumiputera agenda for it to be an effective business model," Nur Jazlan told Business Times when met in Johor Baru recently.

He admitted that there were Bumiputeras who sold off their properties for a quick profit to non-Bumiputeras after purchasing them from UDA Holdings at preferential prices.

"Many of UDA Holdings' properties are freehold and the Bumiputeras who benefited from us should have the moral integrity to not sell them to non-Bumiputeras.

"Our priority for Bumiputeras is not only about providing residential and retail opportunities, but also to ensure that those properties stay in Bumiputera hands while the value increases in the long-term."

Nur Jazlan stressed that UDA Holdings must make a profit first before it can realise its Bumiputera agenda as many of the Bumiputera properties are subsidised by as much as 15 per cent.

He said the first rule of thumb in sustaining a successful business model was: "If you don't make money, then there is no money to give out."

Nur Jazlan said that perception must change in the face of new socio-economic challenges.

"We need to understand that the purchasing power of Bumiputeras today is still limited as most of them are civil servants with fixed incomes. At the same time, the success and value of a development is dependent on the target market.

"So it is important to have a good mix of buyers and tenants to improve the value of the property."

Nur Jazlan cited the BB Plaza in Bukit Bintang, Kuala Lumpur, that is under the company as an example to indicate the importance of having a healthy mix of tenants.

He said the adjacent Sungai Wang Plaza, acquired and renovated by Singapore-based property developer CapitaLand, was enjoying a 20 per cent higher rental yield compared to BB Plaza.

Nur Jazlan suggested that an equity break-up could be as much as 60 per cent Bumiputera and 40 per cent non-Bumiputera, or even an equal 50 per cent, to be healthy.

He believes that such a proposal can improve the property value and is in line with the 1Malaysia concept, without UDA Holdings losing sight of its goal of promoting Bumiputera participation.

By Business Times

Property sector may face downgrade

The property sector is likely to be downgraded if Bank Negara Malaysia imposes a lower mortgage Loan-to-Value (LVR) ratio, says Kenanga Research.

Bank Negara is reported to have written to financial institutions to secure feedback on the possibility of capping the LVR for mortgages at 80 per cent to avert the risk of a potential property bubble.

Currently, banks can usually lend up to 90 per cent of the house value, or up to 100 per cent in selected cases, which has been handy for developers promoting their newly launched under interest absorption schemes like 10/90 home loan schemes.

Kenanga Research in a research note today said it would not be surprised if Bank Negara implements the 80 per cent cap on the mortgage LVR, or at least for properties more than RM500,000, as the government is clamping down on investment related property acquisitions.

"If implemented, we are likely to downgrade our sector call, as we expect property transactions to fall since deposit requirements will double, or essentially doubling the investment risk, limiting the number of homes that an individual can buy.

"We expect buyers to become more discerning when it comes to property choices, meaning stronger market leaders with branding and quality will be winners, when it comes to grabbing the market share of a smaller pie," Kenanga Research explained.

It is also maintaining a "trading buy" call on the property sector for now.

Kenanga Research said currently, the "buy call" is largely premised on strong sales achieved for developers, who are well positioned with several projects or aggressive landbanking.

"We look to review our sector and company calls in the next couple of weeks, pending further light on the matter," it added.

Meanwhile, OSK Research said it is unlikely that Bank Negara will enforce a strict capping of the LVR at 80 per cent across all residential property classes, but rather impose a restriction only on higher end properties.

"We understand however, most banks would have an internal risk control policy limiting the LVR to 85 per cent for higher end residential properties of more than RM700,000," it said.

Residential properties currently contribute to 26.6 per cent and 49.8 per cent of total industry loans and household loans respectively.

"Any excessive credit restrictions by Bank Negara on residential properties could be counter-productive, as it would encourage banks to redirect more of the liquidity to higher risk unsecured personal and credit card loans or lumpy corporate loans," OSK Research said.

By Bernama

UEM Land's Symphony Hills rakes in RM52m

UEM Land Bhd's development project, Symphony Hills in Cyberjaya, raked in RM52 million within the first three weeks of its launch, MIDF Reseach said.

"We believe it will continue to be a hit, given it easy accessibility via the Maju Expressway (MEX) and eventual migration to Kuala Lumpur city fringe (sub-urban) living," MIDF Research said in its research note today.

The research house has maintained its neutral call and forecast for the company shares and revised upwards its target price to RM1.63 from RM1.25, citing the execution risk, improved strategic land sales and capability to attract Foreign Direct Investments (FDIs) as factors.

UEM Land is the real estate investment and property development arm of UEM Group Bhd.

The company posted a pre-tax profit of RM41.268 million for its second quarter ended June 30, 2010, up 361.2 per cent from RM8.948 million in the same period last year while revenue increased to RM88.003 million from RM68.686 million previously.

By Bernama

Saturday, August 28, 2010

YTL Land going global

The Cameron Highlands Resort is one of the pieces of real estate owned by Tan Sri Francis Yeoh.

TAN Sri Francis Yeoh has great entrepreneurial spirit and is fully behind the Government’s plan to improve the country through innovation and technology.

“I think of blue ocean projects. But what was previously blue ocean has today become a must-have,” Yeoh says.

Blue ocean business strategy refers to strategies that an organisation undertakes by creating new demand in an uncontested market space.

“Whatever we do since 1955 have elements of blue ocean, be it the low-cost apartments or otherwise. If we are to build a population for the future, we will not build small five-storey walk-up apartments of about 600 sq ft and have a family of seven living in them. We are condemning them to a social slum (if we do that),” he says.

Whether it is WiMax, or plain bricks and mortar, Yeoh carries with him this big picture of what he wants to do.

Besides wiring up the nation of some 26 million, one of the must-haves that he would like Malaysia to have is that fast train connecting Malaysia with Singapore.

Yeoh believes that the connection will help to close the gap of property prices between Singapore and Malaysia.

“We have the most ‘unappreciated’ real estate. We have been very profitable in Singapore and I am not going to wait around wishing for property (prices) to go up (here),” he says.

He has indicated that he will wait for prices to improve when asked about the lack of activity in Sentul, a nearly 300-acre site the group has undertaken to develop over a 10-year period since early this decade. The last launch in Sentul west was The Maple in 2003.

The award-winning Tanjong Jara Resort with its two swimming pools.

Real estate aspirations

The group unveiled the redevelopment of the Sentul area in late-1990s, after it took over the project from Taiping Consolidated Bhd and renamed it YTL Land & Development Bhd. The plan was to redevelop Sentul and improve its connectivity with train services.

Although property prices have doubled in Sentul and in Pantai Hill Park in the Kerinchi area in the secondary market – YTL Land is developing in both areas – Yeoh is comparing property prices here with other countries in the region where prices have escalated much faster.

Like other Malaysian developers who have developed properties in Singapore, he has found the trip “very profitable.”

To take advantage of buoyant property prices in the region, Yeoh wants YTL Land to go global by leveraging on the expertise of YTL Corp Bhd. Already, YTL Land will be developing Singapore’s Sandy Island and Kasara villas in Sentosa Cove and redeveloping Westwood Apartments on Orchard Boulevard.

YTL Land’s global forays are part of its current ongoing restructuring exercise.

“By the end of this year, YTL Land will become global, with a global CEO to run it.

This will change the whole dynamics of YTL Land,” he says.

Other than in Singapore, YTL Land will also be building a US$100mil (RM338mil) boutique resort on its Koh Samui land in Thailand. That is due to open next year.

“Koh Samui will be the Mediterranean of the East. We will build hotels on the extra Koh Samui land,” says Yeoh.

The restructuring of YTL Land follows the recent consolidation of the group’s hospitality and commercial assets under its two real estate investment trusts (REITs).

The REIT thing

On a current international branding exercise, Yeoh has put his hospitality and resort assets under the Malaysia-based Starhill REIT while Starhill Global REIT (SGREIT) groups his retail malls.

Besides the group’s interest in Singapore’s Wisma Atria and Ngee Ann City, SGREIT also has interest in Japan, Australia, China and Malaysia. With him at the helm, SGREIT has expanded to cover 13 properties worth S$2.6bil in five countries.

His aim is to establish SGREIT as the main YTL-linked vehicle for ownership of prime retail and commercial properties in Asia Pacific.

Starhill REIT will be the country’s first hospitality and resorts trust with assets in Malaysia and abroad.

Starhill REIT has a market capitalisation of US$289mil as at February this year and a portfolio value of US$443mil as at June last year.

The Singapore-based Starhill Global REIT has a market capitalisation of US$747mil as at February this year and a portfolio value of US$2.1bil as at February.

He has injected Niseko Village, which he recently bought for about RM205mil, into the Starhill REIT. The 617-ha ski resort is in Hokkaido, Japan.

He also has The Muse Hotel in Saint Tropez, France which, soon after its relaunch, has become one of Europe’s 20 most popular new hotels. He bought that for between 20 million and 30 million euros.

“Niseko will be the Aspen of the East. We bought into Saint Tropez in France because we wanted to take a French brand back to Asia. St Tropez will be the window to (our assets here),” says Yeoh whose assets, besides Wessex Waters in Britain, tend to concentrate in Asia. He has The Chedi, a resort in Phuket.

He may soon be an acquisition trail globally for real estates.

On the home turf, he already has some award-winning real estate. This includes Pangkor Laut Resort, Tanjong Jara Resort and Cameron Highlands Resort. His hotel brands are Ritz-Carlton, Spa Village, J W Marriott and The Majestic in Malacca.

The group also has Malaysia’s fastest growing cement company in the country. It is the first ready-mix concrete company and the second largest cement company in Malaysia with annual production capacity of 6.1 million tonnes.

YTL Cement has regional expansion plans and is evaluating investment opportunities in Indonesia and China. In 2008, it acquired 100% of China’s Zhejiang HangZhou Dama Cement.

By The Star

Discovering the true value of YTL

It’s an oft-told story about how YTL Group managed to stay resilient during the Asian Financial Crisis even as many large corporations became casualties of the crisis buckling under debilitating debt. That story, more often than not, is narrated by no less than the group’s chief steward Tan Sri Francis Yeoh.

It’s about how the group, by sourcing funds locally and borrowing in ringgit (as opposed to US dollar, which most businesses had done), had managed to fend off the heat of the crisis. So, while so many companies fell off the corporate sidewalk, YTL, armed with an enviable war chest of cash, went trawling to buy up assets on the cheap. Lest we forget, that’s how he scooped up UK’s major sewerage and water specialist Wessex Water over a decade ago, which today is one of its prized assets.

He also frequently enthuses over the level of service provided by the leisure and hospitality group under his stable; how guests are pampered by first class services at third world prices.

But over the years, the lingo has shifted somewhat towards blue ocean strategy and technology. Understandably, Yeoh is passionate about WiMAX 4G and how the offering will change the way consumers think, work and play. That is the group’s new playground. If executed to plan, it could just be the group’s next great feat.

“This is a new business and a very important business (telecoms),” says Yeoh, YTL Corp’s managing director.

YTL Corp Group is today largely an infrastructure player with 12 million customers with businesses spanning three continents. It has five listed companies, excluding the REITs, within its stable and for the first time in its corporate history, revenue reached a whopping RM16bil. Net profit was RM873mil for the full year ended June 30, 2010.

This is a blue chip group with a market value of some RM34bil. Combined, the group has assets worth RM45.4bil and a war chest of RM12bil cash.

Yet investors’ response to YTL Corp appears to be lukewarm at best.

“I don’t have a Buy call on YTL Corp and I think at the current price it is fairly valued. It is not as sexy a story as its power and water units. But it does have stable earnings and dividends given the layers of profit and cashflow from its units,’’ says an analyst. On Friday YTL Corp shares closed one sen lower to RM7.44.

The new frontier

The transformation is already in motion. The group prides itself for adopting the blue ocean strategy – which means going where none of their competitors have ever been. As a result, it has a lot on its plate going forward.

WiMAX, for now, appears very much on the priority list of the group’s next frontier.

“It is a very big thing, the public will gain and the nation will change when we take it to town in November. The other telcos will have no choice but to be fully immersed in 4G. 4G is coming, it is a challenge and it will be fantastic,’’ says Yeoh.

Shake the market and set new benchmarks, it definitely will. YTL is using Malaysia as the test bed for WiMAX 4G. If it gets it right, the model will be replicated elsewhere across the globe. That would make it the biggest player ever to deploy WiMAX extensively.

“Partners will come to us once we prove it’s successful. I am sure all of the Asean countries (will come) and we will also get invited to expand. Our global footprint will grow and that is the kind of growth targets (we are looking at),’’ he adds.

It is not just the voice, data, video and mobile business that the group has the potential to be involved in but the whole gamut.

The World Bank conducted a study last year on the impact of broadband on the economy and found that every 10% penetration growth in broadband creates a 1.38% corresponding GDP increase in developing countries.

“Every thing that we do from 1955 (since the group’s inception) has been based on the blue ocean strategy. This is our biggest initiative,’’ he says.

The involvement in WiMAX 4G presents a perfect picture of its involvement in the utilities sector.

Besides 4G, there are areas in the water and energy business that the group wants to expand into.

The journey

The group’s history dates back to 1955. It started as a construction company, building low-cost apartments to pioneering high-rise construction. Back then, the group needed to arrange financing for these apartments.

It was the expertise and use of technology that thrust them to the forefront of construction and YTL became the first turnkey contractor in the country. Yeoh says they were the envy of the Japanese contractors, who took three weeks to complete a floor of a building while YTL only needed seven days.

“The secret was really in the continuous pouring of concrete to hasten the process,” he says.

The KL Tower which stands tall today in the city’s skyline is a product of continuous pouring of concrete, hence its early completion. YTL had the foresight to own a cement plant that helped them manage cost.

The going was extremely good for the construction business. Then the group got another break in the early 90s following the nationwide blackout. That marked their first step into the lucrative utility sector. YTL was the first independent power producer (IPP) and managed to build a plant in a record time of 14 months. But this happened in juxtaposition, with the vociferous criticism that the IPP awards were not given out on open tender basis and the rates were unseemingly high, placing the national utility Tenaga Nasional Bhd at a great disadvantage given its high payouts to the IPP for power generation.

To fund the plant, the group opted to issue ringgit-denominated bonds, which was frowned upon by some.

“Nobody then wanted to listen to us but we believed that Asian infrastructures should be funded by their own savings rate. Asians are savers, why should we borrow from outside?’’ he says.

Over the years, the group has managed to strengthen its portfolio in the utility segment, adding more power plants such as PT Jawa and Power Seraya Ltd. Its generation capacity has grown many-fold from 1,000MW to 4,315MW. It has also gone into the power transmission business with a 33.5% stake in Australia’s ElectraNet.

An opportunity to own water assets came with Wessex Water in 2002. It was a major coup to own a British company then. From then on, there was no stopping for this group which grew and spread its wings via acquisitions.

But as Yeoh puts it: “All that is history, let’s talk about the future.’’

IPPs a ‘jurassic model’

Abundant opportunities in the water and power sectors in Australia, Britain and Asia are currently beckoning. “We want to play a bigger role where the future is brighter,’’ he says.

Regulatory frameworks are changing to open up markets for competition and allow more players to participate so that there are choices; with competition, the cost of services for end users generally come down.

“The chances of Asia going that way is better,’’ he adds.

An analyst says until and unless the group acquires more assets there is not going to be a big jump in earnings. The talk is that they are eyeing water and energy assets in Asia and given the big war chest of cash it has it should stock up sooner than later.

“They are actively looking for power and water assets in the region, it would be the regulated ones,’’ says an analyst.

Yeoh feels the era of IPP is over. He calls it a “jurassic’’ model to create a power plant to serve only one customer.

“We trade energy, we produce and sell power. We are no longer an IPP and we believe the IPP business is over. We also think there should be no more IPPs,’’ he says.

His belief is that governments should do away with monopolies and introduce competition, allow the players to compete to supply power to the grid.

“Anyone can be a power producer and supply to the grid and that will create competition and allow consumers to chose the cheapest source of power,” he says. Whether this formula is workable remains to be seen but his rationale is that if Singapore can, why not Malaysia?

“If there can be competition in the water and telecoms sector, why not introduce it for the power sector (to make players more efficient)? It is better for the public as they will have choices,’’ he says.

“We want to cut a bit more in power business. We want to be a total energy power player.”

On high speed

The mere mention of the proposed KL-Singapore high speed rail link excites him. He is not ready to give up on his proposed project although things have been pretty quiet at that end. If the project sees the light of day, he says, it would create value not just in property but also spur economic benefits at both ends – Malaysia and Singapore.

“I always believe that if people want it, it will happen,’’ Yeoh says.

The group’s hospitality business has grown with recent acquisitions and the creation of REITs.

And don’t rule out more assets coming into this stable. The group bought The Muse Hotel in Saint Tropez in France, which has become one of Europe’s 20 most popular hotels, the Niseko Village – a ski resort in Hokkaido, Japan that has become the Aspen of the East, and Pangkor Laut Resort in Pangkor is another internationally acclaimed resort.

“We have a global footprint on hotels and we are profitable,’’ he says.

Somehow, the visible success in most of these businesses has yet to reflect on the group’s massive property project in Sentul – Sentul East and West. Toss out all the hype and brouhaha and it would seem as if the project is not moving as fast as expected.

Yeoh puts the blame on real estate valuations, which is rather modest compared to Singapore and Hong Kong. He hopes prices will eventually appreciate but that appears a tough task for the time being

“I am waiting for KL to be a very attractive capital,’’ he says.

The true value

With wings spread across several continents and several key businesses abroad, the company could well be a Malaysian multinational. But it faces its fair share of challenges – regulatory hurdles abroad plus geo-political and currency fluctuation issues. Having staunchly adopted the blue ocean strategy, Yeoh says, competition is by no means to be feared. In fact, it is very much ingrained in the group’s DNA.

As it stands now, succession planning is very much in place for the group. The next generation of Yeohs are already learning the ropes from the seniors. In fact, for this interview Yeoh’s son Joshua was present throughout to prep himself up for similar sessions in future. “That is part of the training,’’ says Yeoh.

The circle of family business, it appears, is very much intact. For YTL Group, it is on to being driven by the third generation. But there’s no doubt that till then, Yeoh still has a lot that he wants to do first.

By The Star

The need for affordable housing to meet demand

Rising worries over the escalating cost of living and prices of goods and services has become a hot topic among the average Malaysians these days with one of their major concerns centred around the removal of subsidies by the Government.

Their concerns are understandable as the threat of a looming inflation will further constrain the people’s purchasing power.

If prices continue to rise, very soon those who now fall under the middle-income group will find themselves “demoted” into the lower income category as the value of their ringgit shrinks.

No wonder people are taking stock of their financial position and have become more vigilant over their spending. Even the more upmarket and usually packed “buka puasa” restaurants are reporting slower business this time around.

However, the strong sales of big ticket items, including residential property and cars, show that despite their relatively high price tags, owning a house and a car are considered priorities for the majority of the populace.

In particular, demand for houses has skyrocketed in the past year and this has contributed to a sharp rise in prices.

Meanwhile, supply of houses has not caught up as fast and this has resulted in a market in equilibrium where demand still exceeds supply.

Although developers are expected to speed up on their new project launches to take advantage of the strong sales, how fast the “production line” moves will depend on the speed of the approval process at both the state and federal government levels.

Hopefully the one-stop centres (OSCs) in local authorities to consider building and development project applications are playing their roles well to ensure developers who abide by all the rules and regulations will have their building approval process expedited.

It is not unusual to hear developers still lamenting about delays at some of the local authorities which have hampered their project development time-lines.

In keeping with the spirit of the Special Taskforce to Facilitate Business (Pemudah), any unnecessary red tapes and bureaucracy should be reduced if not eliminated completely. By enhancing the market’s efficiency, it will overcome the housing supply shortage and help promote a more balanced and equitable market.

Given the strong demand for houses, this is in fact a good time for the state governments to direct their state development agencies (SEDCs) that are entrusted with building affordable housing projects for the low to middle income groups to uphold their duties diligently.

Their primary role is to undertake social and economic projects that help the lower income population. Thus, enabling more Malaysians to own houses.

Instead of competing with the private developers by getting involve in high-end property projects which are out of the reach of the average Malaysians, they should offer more affordable priced houses within the price range of between RM200,000 and RM400,000.

In view of the strong interest for landed housing these days, these SEDCs should launch more lower to medium-priced landed residential projects.

Many of the SEDCs have very prime landbank but on many occasions in the past, they have taken the short cut of selling these land to other developers instead of undertaking the projects themselves or through joint ventures.

In keeping with their social-economic roles to help the less privileged, these agencies should develop their land with a social conscience to help the people.

To attract the targeted buyers, their projects should be well planned and located in good locations with good infrastructure connectivity.

As part of their corporate social responsibility, private developers can partake in such projects by forming joint ventures with the SEDCs to lend their expertise.

Although their interest has shifted to the higher-end range of products, developers should also maintain a more balanced product portfolio with an array of low-medium to medium and higher priced projects.

Given the power of “word of mouth” in building a company’s image, developers who show they care for people’s welfare will be better appreciated and have a stronger customer following in future.

Deputy news editor Angie Ng hopes more concerted efforts will be expended to provide for more quality and affordable housing in our cities as a wholesome living environment for the people is a pre-requisite for a safe and progressive Malaysia.

By The Star

An upside in the office market

A drop in the capital value of office buildings from their previous highs is attracting higher interest among investors looking for potential value upside and good rental income streams, say property consultants.

According to CB Richard Ellis Sdn Bhd executive chairman Christopher Boyd, the value of office buildings has fallen by an average 10% to 15% from their absolute highs around mid-2008 and this offered potential for capital upside.

“It is more a seller’s market right now as there is not enough investible buildings around to meet demand. Given the lower entry cost, demand is getting stronger especially for office buildings that are well managed and located, have high occupancy and offer good yields,” Boyd tells StarBizWeek.

If the rising demand continues and the country’s economic recovery is sustained, he expects further upside in the office market.

“I believe with the right planning, the office market can be easily well balanced in terms of supply and demand,” he adds.

Office transactions between March and June included the sale of two office buildings by UOA Holdings to UOA REIT. Wisma UOA Damansara II, which has net lettable area (NLA) of 297,000 sq ft was sold for RM211mil, and Menara UOA Bangsar (Parcel B), with NLA of 312,000 sq ft was sold for RM289mil.

During the quarter, Menara Olympia was sold for RM200mil while Wisma Time was transacted at RM78mil. The latest sale involved that of Menara Pan Global which exchanged hands at RM160mil last month.

“The outlook for en-bloc sale of office buildings will still be good as investors are looking to lock in at the current lower asking prices,” says Boyd.

Even so, in its latest Kuala Lumpur office property market report, CB Richard Ellis said another 1.7 million sq ft of office space are scheduled to be completed in Kuala Lumpur by end-2010.

These include Hampshire Place Corporate Office Tower and Menara Worldwide, Capital Square Office Tower 2, BRDB Office Tower, BZ-HUB @ One Mont’ Kiara and Menara Ireka @ One Mont’ Kiara.

With supply projected to increase at an accelerated rate from the second half of this year, office rents are not expected to show any significant increases over the coming months.

The situation is expected to prevail until 2013.

“We estimate another 3.5 million sq ft of office space will be completed in Kuala Lumpur next year and 4.9 million sq ft will come on-stream in 2012. There are also numerous projects in the planning stages, accounting for at least 11 million sq ft. Whether or not a large portion of these projects go ahead as planned will have a profound effect on the city’s office market from 2012 onwards,” it said in the report.

Meanwhile, KGV-Lambert Smith Hampton Sdn Bhd director Anthony Chua says most of the recent office transactions were for second grade buildings that were quite old and located in less prime locations.

With proper upgrading and refurbishment, the buildings will be able to command quite good rental rates for the new owners.

“Although the office market is generally still quite soft in terms of occupancy and rental, it is a good time for investors to shop around for some opportunistic buys to position themselves for a market upswing in the future,” says Chua.

In addition, owners of office buildings who are looking to cash out may be willing to consider selling at more reasonable prices.

Knight Frank Malaysia executive director Sarkunan Subramaniam points out that there are a number of secondary buildings up for sale at between RM350 and RM600 psf.

Meanwhile, Grade A office buildings have price tags ranging between RM800 and RM1,200 psf.

“There is always demand for good office buildings – if the price is right and where there are opportunities to upgrade for value enhancement. Such transactions have become more palatable after the asking prices dropped from their previous highs,” he elaborates.

City Valuers & Consultants Sdn Bhd general manager CY Lim concurs that well-tenanted buildings are still in the radar screen of potential buyers, especially for their rental streams: “The cash flow from office buildings is dependent on the occupancy and rental rates. Of course one also has to consider the capital value of the property and whether it has potential for appreciation.”

By The Star

RM300m properties sold at expo

Over RM300 million worth of properties were sold at the sixth Expo Luxury Collection 2010 recently.

Organised by Malaysia, the expo showcased some of the world's most luxurious property developments and resorts at the prestigious Kuala Lumpur Convention Centre from July 30 to August 1.

The record expo sales figures are testimony that the appetite for properties remained strong, Malaysia said in a statement in Kuala Lumpur yesterday.

"The record sales made at the show are testimony that our property exhibitions continue to deliver results while providing an opportunity for developers to connect with property hunters," chief executive officer of group Shaun Di Gregorio said.

One development that stood out was Acmar International's D'Rapport Condo in Ampang, where an estimated RM180 million worth of registered bookings were made over the three days. The 80 units reserved were priced between RM1.6 and RM5.5 million and were not due to be launched officially until September.

Spanning a space of 6,000 sq m, the expo was the biggest property exhibition ever held in Malaysia.

By Bernama

UEM Land Q2 earnings up more than sixfold

UEM Land Holdings Bhd, a property developer, said second quarter net profit jumped more than sixfold to RM40.3 million, mainly due to gains from its disposal of Touch 'n Go Sdn Bhd.

The company made a gain of RM25.6 million from selling its 20 per cent stake in Touch 'n Go to PLUS Expressway Bhd for RM33.4 million. The disposal was completed in June this year.

During the quarter ended June 30 2010, the company's revenue grew by 28 per cent to RM88 million, partly driven by higher sales of its industrial land in the Southern Industrial Logistic Clusters.

UEM Land believes it is able to achieve its headline key performance indicators (KPIs) set for this year, which includes an annual revenue growth of 35 per cent and return on equity of 6 per cent, backed by improvement in the property market.
"The group is confident that the property market will continue its recovery in line with the encouraging gross domestic product (GDP) growth achieved by the country for the first half of 2010.

"The property market in Johor generally, and Iskandar Malaysia specifically is expected to further benefit from the recent increase in interest from Singapore.

"We expect the group to benefit from this positive sentiment and will continue to launch new residential projects in Nusajaya, as well as launching new phases of our existing residential projects in Nusajaya and Cyberjaya in the coming months.

"The Group will continue to evaluate opportunities to acquire strategic land parcels outside Nusajaya to expand and grow our business to create sustainable return on investment for our shareholders," it said in a Bursa Malaysia filing yesterday.

The company's share price on Bursa Malaysia declined 4 sen, or 2.38 per cent, to RM1.64.

By Business Times

Friday, August 27, 2010

Mah Sing meets RM1b full-year sales target in 7 months

Property developer Mah Sing Group Bhd says its second-quarter net profit rose by more than a quarter and it has met its RM1 billion full-year sales target in just seven months.

The group has now set a new sales target of RM1.5 billion as it prepares for new launches for the rest of the year.

"The group is confident it will be able to achieve satisfactory results for the current financial year.

" This is in view of the strong sales already locked in from its balanced and diversified property portfolio," Mah Sing said in a statement to Bursa Malaysia yesterday.
Mah Sing reported a net profit of RM29.2 million for the quarter to June 30 2010, which was 27 per cent higher than RM23 million recorded in the same quarter of last year.

For the quarter under review, the group's revenue almost doubled to RM289.1 million.

On a six-month basis, Mah Sing's net profit rose by a quarter to RM57 million on the back of RM527.4 million revenue, a two-thirds jump.

The better revenue and profit were contributed by several of the group's new projects such as Southgate Commercial Centre, StarParc Point, i-Parc@Bukit Jelutong, Perdana Residence 2, Aman Perdana, Hijauan Residence and Kemuning Residence in Klang Valley.

Its plastics division also reported improved revenue and profit.

Mah Sing is now planning some 10 new projects. Among the launches and previews are One Legenda designer bungalows which prices start from RM3.5 million, Kinrara Residence Link Homes (from RM718,800) and Garden Plaza serviced suites in Cyberjaya (from RM228,800).

"Our launches have always been eagerly awaited. Over the weekend we've already had people queuing up for our Kinrara Residence," said managing director Tan Sri Leong Hoy Kum.

On Bursa Malaysia yesterday, shares of Mah Sing closed 1.1 per cent higher to RM1.84.

By Business Times

Selangor Dredging bullish on sales

SELANGOR Dredging Bhd expects future earnings to improve as it aims to launch several new projects in Klang Valley and Singapore worth a combined RM1 billion over the next two years.

Its unbilled sales of RM650 million from its recent launches namely Five Stones in Petaling Jaya, 20trees West in Kuala Lumpur and Gilstead Two in Singapore will also drive growth, chairman Eddy Chieng Ing Huong said.

Last year, Selangor Dredging posted a net profit of RM18 million, four per cent more than in 2008.

"We will continue to capitalise on the projects we have launched. From the unbilled sales, it is quite clear the company will do well," Chieng said after the company's shareholder meeting in Kuala Lumpur yesterday.
Selangor Dredging has five ongoing projects, two in Taman Melawati in Kuala Lumpur, one in Petaling Jaya and two in Singapore worth RM1.2 billion, which will last another four years.

Chieng said the projects have garnered an average 80 per cent sales over the past 12 months.

The condominiums and bungalows are priced at more than RM1 million and RM3.5 million, respectivly. For the project in Singapore, the apartments are worth more than S$1.8 million (RM4.8 million) each.

"We are able to sell our projects at a premium because of the concept. Our purchasers like what we sell and we do not price ourselves like a commodity.

"A lot of our purchasers buy a collection of properties here and in Singapore. Buyers are very discerning. Even during bad times they buy," he said.

Chieng said in the next six months it will launch Dedaun off Jalan Ampang, comprising low-rise condominiums, and 262, Balestier Road in Singapore, which is a commercial and residential development, both worth some RM350 million.

It then plans to launch high-end apartments in Batu Feringgi in Penang, a commercial development next to Five Stones, landed housing in Puchong and Dengkil, and a residential project in Singapore.

On the controversial Damansara 21 hillslope project in Bukit Damansara, Chieng said the company is awaiting the approval from the authorities, including City Hall, on when works can start.

A stopwork order was issued some 30 months ago on the project, which consists of 21 bungalows priced RM10 million to RM15 million each, following the Bukit Antarabangsa landslide incident.

By Business Times

Olympia aborts sale of flagship building

PETALING JAYA: Olympia Industries Bhd has decided to abort the proposed disposal of its flagship corporate building Menara Olympia in Kuala Lumpur to Jelita Timur Sdn Bhd.

It announced to Bursa Malaysia yesterday that Jelita Timur said it would withdraw from the transaction due to the delay on Olympia’s part in obtaining the requisite approvals to date and the inability of the company to complete the sale at this juncture.

“Provided the company is able to refund the deposit paid by the purchaser (Jelita Timur) of RM3.015mil in full together with interest earned, the purchaser will not deem the company to be in breach of its obligations as set out in the sale and purchase agreement dated April 9, 2010.

“In view of the uncertainties regarding the transaction, the board of Olympia has deliberated on the commercial and legal aspects of the transaction and has unanimously agreed that it is in the best interest of the company to mutually abort the transaction,” it said.

In June, Olympia received a directive from Bursa to conduct a second valuation on Menara Olympia and the adjoining car park, with the professional valuer to be appointed by Bursa Malaysia Securities. The valuer was appointed last month.

Bursa Securities had also instructed Olympia not to complete the sale of its wholly-owned subsidiary Dairy Maid Resort & Recreation Sdn Bhd, which owns and manages the building, without prior consultation with the regulator.

Olympia entered the agreement with Jelita Timur for the sale of 100% equity interest in Dairy Maid Resort & Recreation in April.

The agreed value of the leasehold land and building known as Menara Olympia was RM190mil and the agreed value of the rights to operate the car park granted by the Government (which will expire on Dec 26, 2025) was RM10mil.

The properties to be sold were charged to secure combined debts of about RM172.5mil outstanding as of the date of the agreement.

Under the agreement, Dairy Maid would be subject to the liabilities under a loan to be obtained by Jelita Timur for the company to redeem the Olympia securities comprising RM49.118mil redeemable unsecured loan stocks and RM70.682mil irredeemable convertible bonds and the loan facility of RM52.72mil obtained by Dairy Maid which were secured against legal charges created over Menara Olympia.

By The Star

UEM Land 2Q profit jumps 583% to RM40.3m

KUALA LUMPUR: UEM LAND HOLDINGS BHD's net profit for the second quarter ended June 30, 2010, (2Q10) jumped an impressive 583% to RM40.34 million from RM5.90 million a year ago in line with higher revenue and gain of RM25.6 million on the disposal of an associate, Touch 'N Go Sdn Bhd to PLUS Expressway Bhd.

Its revenue for the quarter rose 28.1% to RM88 million from RM68.68 million previously due to higher revenue from sales of industrial land in Southern Industrial Logistics Clusters, developed land sales in Puteri Harbour and higher sales of development properties in Nusa Idaman.

Earnings per share was 1.23 sen in 1Q10 versus 0.21 sen in the same quarter last year, while net assets per share was 70 sen.

For the six months ended June 30, 2010 (1H10), UEM Land net profit was RM43.48 million versus RM8.53 million a year ago, on the back of a revenue of RM127.7 million.

On its prospect for the current financial year, UEM Land said it was confident that the property market would continue its recovery in line with the encouraging Gross Domestic Product (GDP) growth achieved by the country for the first half of 2010.

"The property market in Johor generally, and Iskandar Malaysia specifically is expected to further benefit from the recent increase in interest from Singapore,'' it said in a filing to Bursa Malaysia Securities on Friday, Aug 27.

The group said it would continue to launch new residential projects in Nusajaya as well as launch new phases of its existing residential projects in Nusajaya and Cyberjaya in the coming months.

"The group will continue to evaluate opportunities to acquire strategic land parcels outside Nusajaya to further expand and grow our business to create sustainable return on investment for our shareholders," it said.

By The EDGE Malaysia

Thursday, August 26, 2010

E&O profit up on property arm

An artist’s impression of Straits Quay at Seri Tanjung Pinang

PETALING JAYA: Eastern & Oriental Bhd (E&O) net profit for the first quarter ended June 30 rose 103% to RM10.2mil from RM5.1mil in the same period last year, driven mainly by its property development arm.

However, its revenue for the quarter was 37% lower at RM46.3mil compared with RM73.9mil a year ago.

In a statement, executive director Eric Chan Kok Leong said the results were largely attributable to profit recognition of its St Mary Residences project in Kuala Lumpur and Villas-by-the-Sea at Seri Tanjung Pinang.

He said an upcoming highlight for E&O would be the launch in November of Straits Quay, which would be Penang’s first seafront retail marina.

This 12-acre retail centre and commercial enclave will be built around a marina at E&O’s masterplanned seafront development of Seri Tanjung Pinang.

Malaysia’s iconic pewter brand Royal Selangor has yesterday announced its plan to set up a Royal Selangor Visitor Centre at the Straits Quay retail marina in December.

“E&O has successfully built its brand locally in the past five years to be on par with even some international names,” Chan said.

“The group is confident that it is timely to take the brand to the next level, to the regional and global arena, and is open to strategic opportunities to leapfrog this process.”

By The Star

Selangor Dredging upbeat on 2010 outlook

SELANGOR Dredging Bhd is upbeat on its outlook for the year with RM650 million unbuilt sales and property launches worth RM1 billion in gross development value (GDV) in the pipeline.

"We have grown quite substantially with RM650 million of unbuilt sales as compared to this time last year when we only had RM150 million of unbuilt sales," Chairman Eddy Chieng said in a press conference Thursday.

He said with the company's positive five years' track record, it would continue to capitalise on its success with more property launches in the future and current developments in Malaysia and Singapore.

Moving forward, Managing Director Teh Lip Kim said the company would launch projects in Ampang in November and 104 units of apartments in Singapore by year end with a total GDV of RM350 million.

"We still have a stop work order for our Damansara 21 hill slope development and is waiting to hear from the authorities," she said, adding that the company had not been informed of any progress on the site.

Currently, the company has three ongoing developments in the country and two in Singapore with a GDV of RM1.4 billion in total.

On average, 80 per cent of its five ongoing projects were sold within a year, and Five Stones in particular is 99 per cent sold.

Besides the five ongoing projects, the company has a strategic land in Singapore, a 5.6-acre land in Batu Feringghi and a commercial land next to its Five Stones project.

"While we are embarking on the property development business, we are anchored down by very good core assets with four office tower blocks in Wisma Selangor Dredging that is 95 per cent fully leased, generating steady cashflow for the company," said Chieng.

He said the company would focus more on property development with an asset ratio of 70 per cent in property development and 30 per cent in property investment.

Returns contributed by property development stand at 80 per cent while less than 20 per cent from property investment.

"We can sell our products at a premium due to our concepts as we do not price ourself as a commodity but a niche property developer that offers buyers higher value proposition.

"We have been able to leverage on our brand and are selective on lands which are strategically located with projects well thought out and functional and suit the current lifestyles of buyers," he said.

The company sits on top a RM19 million cash pile, and is not looking at any fund-raising exercises.

By Bernama

Development of former Pudu Jail site to cost RM5bil

The proposed project is part of the Kuala Lumpur development master plan. UDA took over the site in November 1996 when the prison was officially closed. The development was first unveiled by Second Finance Minister Datuk Ahmad Husni Hanadzlah in May.

KUALA LUMPUR: UDA Holdings Bhd is talking to a few joint-venture partners to develop the former Pudu jail site and the 22-acre land next to it, but UDA will remain the sole master developer. The project is estimated to cost about RM5bil.

UDA chairman Datuk Nur Jazlan Mohamed said: “We will try to keep it at RM5bil.

“This is a project for the country. If we target the product well, we will be able to have a good price for the residential portion of it, even if a large portion of it will be bumiputra-owned. The Pudu Prison site will be our social responsibility.

“We must have a mix in terms of bumiputra and non-bumiputra ownership to do justice to the land value. There must be a mix. (I) don’t put a figure to it but there must be a mix.

“I want to stress that at UDA, we are clear; we take care of the bumi interest and we balance our commercial interest against our social responsibility. That applies to all our projects. We have to make money first before we can distribute.”

He said there had been a lot of speculation on who the JV partners were. There was also a lot of speculation that there would be a joint master developer, he added.

“There will be no joint master developer. We will be the sole master developer but we are talking to a few developers to be our joint-venture partners.

“So far, many developers have shown their interest but there is no decision yet,” Nur Jazlan said.

»Do we want to rely on spillover traffic, that is, take the easy way out and just develop the place, or do we want to create a new destination?« UDA CHAIRMAN DATUK NUR JAZLAN MOHAMED

He said the joint ventures could be at the plot level, where JV partners take up one of the six plots, or it could be a joint venture to construct the buildings on the different plots.

He said it really depended on the final layout of the master plan and that he was tweaking that at the moment.

Nur Jazlan said he was making adjustment to the latest round of plans because he was taking into consideration Permodalan Nasional Bhd’s proposed plan to build a 100-storey project at the Stadium Merdeka site, which is not far from UDA’s site, as well as the 34.4ha development at Dataran Perdana, to be known as Kuala Lumpur International Financial District in Jalan Sultan Ismail near Berjaya Times Square.

New plans will be submitted by the end of the year by UDA, a government developer. “The property that is being developed around us will define our final plan,” he said.

While Nur Jazlan agrees that it should be a mixed development comprising serviced offices, residential, retail and a hotel or two, he has his own views about the form, positioning and configuration of the various components.

“We will submit new plans by the end of the year. The final project depends on market conditions as well as other properties that are being developed around us,” he said.

“Depending on the buildings and their density, the price premium that UDA has to pay the Government will vary. I want to stress the fact that the land is not given to us. Because it has a commercial title, the price of the premium will be higher.

“The first and most important question we are asking ourselves is: Do we want to rely on spillover traffic, that is, take the easy way out and just develop the place, or do we want to create a new destination? KLCC, for example, is a new destination,” he said.

The proposed project is part of the Kuala Lumpur development master plan. UDA (then known as the Urban Development Authority) took over the site in November 1996 when the prison was officially closed.

The development of the former Pudu Prison was first unveiled by Second Finance Minister Datuk Ahmad Husni Hanadzlah in May.

Husni said then that the mixed development project, to be known as Bukit Bintang Commercial Centre, will comprise a 33-storey office tower, a shopping complex, 43-storey hotel and a 44-storey serviced apartment.

The proposed development drew various comments from developers and property consultants. They ranged from the challenges of marketing a site where executions have taken place to the number of projects being spearheaded by the Government.

Questions have also been asked about who will occupy these various premises, which so far number about five, that the Government and government-linked companies are going to be involved in. These include the development of Sg Buloh, the Matrade development by the Naza group, the redevelopment of Kampung Baru, the Stadium Negara project, 1MDB’s works in Sg Besi and Dataran Perdana.

Some of UDA’s projects include condominiums Sinaran TTDI in Taman Tun Dr Ismail and Gaya Bangsar in Bangsar, both in Kuala Lumpur. UDA is also tasked with the RM52mil upgrading works of Puduraya bus terminal in Kuala Lumpur. The Puduraya terminal would resume operations in January next year.

Nur Jazlan said while Puduraya would remain the main terminal, as the city grew it was better to have mini transport hubs in various places like Gombak, Bandar Utama, Titiwangsa Selatan and other places.

By The Star

ARMB eyes RM200m commercial assets

AXIS REIT Managers Bhd (ARMB) plans to buy a cluster of commercial assets worth more than RM200 million in Petaling Jaya and Shah Alam to expand its portfolio.

Chief executive officer Stewart LaBrooy said it will place out about 20 per cent of its current fund size to raise up to RM160 million for the acquisitions.

"If we leverage that up, we can buy over RM200 million new assets," he told Business Times yesterday after its shareholders meeting in Kuala Lumpur.

ARMB, the manager of the world's first office/industrial Islamic real estate investment trust (REIT), now manages 27 properties with more than 4.5 million sq ft of space worth RM1.2 billion.

The properties range from offices and warehouses to logistic centres and hypermarkets.

LaBrooy had said in July that ARMB is targeting to manage RM1.6 billion worth of assets.

Its latest deal is to buy Tesco hypermarket in Johor, Axis Technology Centre in Petaling Jaya and Axis PDI Centre in Klang worth RM200 million.

ARMB is also buying a logistics warehouse in Port of Tanjung Pelepas in Johor, Axis Techpoint 1 in Petaling Jaya and an office building in Cyberjaya. The acquisitions worth a combined RM190 million will be completed by early next year.

"There is pent-up demand for office space in Selangor. People are moving from Kuala Lumpur due to traffic congestion and high rentals," he said

LaBrooy said ARMB plans to refurbish three of its existing properties over the next two years for RM2 million to RM5 million each to raise rentals.

The properties are Kayangan Depot in Shah Alam, Crystal Plaza and Infinite Centre in Petaling Jaya.

On REIT, LaBrooy said the market was doing better, compared with 12 months ago, attributed by the strengthening of the ringgit and the equity market.

"It has come back on the radar. We are far more liquid now. The market has outperformed the industry. Government-linked companies are performing well and that augurs well for the country and with that comes a lot of opportunities," he said.

By Business Times

Mah Sing 2Q earnings up 26.5% at RM29.6m, ups sales target to RM1.5b

KUALA LUMPUR: Mah Sing Group Bhd posted net profit of RM29.16 million in the second quarter ended June 30, 2010, up 26.5% fromRM23.04 million a year ago.

It said on Thursday, Aug 26 that revenue jumped 72.8% to RM289.05 million from RM157.23 million. Earnings per share were 3.55 sen versus 3.67 sen.

“We have exceeded our full year sales target of RM1 billion within seven months and have revised our sales target to RM1.5 billion for 2010,” it said.

For the first half ended June 30, it said revenue rose 66% to RM527.36 million and net profit 25% to RM57.04 million.

Projects that contribute to solid revenue and profit for the current financial period include Southgate Commercial Centre, StarParc Point , i-Parc@Bukit Jelutong , Perdana Residence 2 , Aman Perdana, Hijauan Residence and Kemuning Residence in Klang Valley; Residence@Southbay in Penang and Sierra Perdana , Sri Pulai Perdana 2 , and Austin Perdana in Johor Bahru.

The plastics division also recorded improved revenue and profit over the corresponding period in the previous year.

“The remarkable property sales recorded in the first half continue to provide steady cash flows and liquidity. The group’s balance sheets remain healthy with low net gearing ratio at 0.05 as at June 30, 2010,” it said.

By The EDGE Malaysia

Housing slump clouds US recovery prospects

WASHINGTON: US home sales are plunging despite rock-bottom mortgage rates as high unemployment prevents people from buying houses and threatens to curtail economy recovery.

Existing-home sales plunged for the third straight month by a whopping 27.2 per cent in July to levels unseen in more than a decade, an industry group said on Tuesday.

Sales of single-family homes, townhomes and condominiums dropped to 3.83 million units from 5.26 million units in June, said the National Association of Realtors.

The slide was more than double the 12.1 per cent expected by most economists, with sales at the lowest level since 1999.

"The disappointing US home sales data has investors worried that the global recovery is unraveling," said Chris Lafakis, an economist at Moody's

Single-family home sales - accounting for the bulk of transactions - were at the lowest in 15 years, the association said, providing the latest statistics on the housing sector, which was at the epicentre of the financial crisis that plunged the nation into recession in December 2007.

If sales do not improve, rising inventories - there are nearly four million unsold previously owned homes in the market - could eat further into prices.

"The first worry is that we are not seeing much response in demand to the historic drop in mortgage rates," said Societe Generale analyst Aneta Markowska.

Thirty-year mortgage rates have fallen to a record low 4.42 per cent but mortgage applications for new purchases as of early August were sitting very close to cyclical lows.

"Housing and employment continue to be major problems for the US recovery," said analyst Andrew Busch of BMO Capital Markets.


US existing-home sales at 15-year lows

A ‘for sale’ sign sits in front of a home in Alexandria, Virginia. Existing US home sales plunged a steeper than expected 27.2% in July. — AFP

WASHINGTON: Sales of previously owned US homes took a record plunge in July to their slowest pace in 15 years, underlining the housing market’s struggle to find its footing without government aid.

Tuesday’s report from the National Association of Realtors (NAR), which was much worse than market expectations, was the latest data that indicated economic activity continued to slacken into the third quarter.

The NAR said overall sales were at their lowest since it started the existing-home sales data series in 1999, with single-family home sales that account for most business at their lowest since 1995. Association chief economist Lawrence Yun characterised the overall sales as the softest since 1995.

The dismal sales report came as Chicago Federal Reserve president Charles Evans warned that the risk of a double-dip recession was higher than six months ago. He doubted that output will actually shrink but said recovery will be modest.

“It is becoming abundantly clear that the housing market is undermining the already faltering wider economic recovery,” said Paul Dales, a US economist at Capital Economics in Toronto. “With the increasingly inevitable double-dip in prices yet to come, things could yet get a lot worse.”

Existing-home sales dropped a record 27.2% from June to an annual rate of 3.83 million units. June sales were revised down to a 5.26-million-unit pace from a previously reported 5.37 million.

Financial markets had expected sales to fall only 12% to a 4.70-million-unit rate last month. The end of a popular home-buyer tax credit, which had supported sales and home-building activity, continues to haunt the troubled housing market.

Major US stock indices tumbled more than 1.3% as investors dumped riskier assets in favour of safe haven government debt. Prices for US Treasuries rallied, with the yield on the two-year note tumbling to a record low.

The cost of insuring US homebuilders’ debt rose. The US dollar fell to a 15-year low against the yen and also dropped versus the euro.

The housing market, which helped to push the economy into its worst recession since the Great Depression, has been mired in weakness following the end of the tax credit in April.

The incentive pulled forward sales and building activity, leaving a huge void that analysts said was also being exacerbated by a 9.5% unemployment rate.

The sour economy, especially the stubbornly high unemployment rate, is hurting President Barack Obama’s popularity and putting in jeopardy the Democratic Party’s control of Congress in November’s mid-term elections.

Almost three-quarters of Americans are very concerned about unemployment and more people now disapprove of Obama than approve of him, according to the latest Reuters/Ipsos poll.

The government is expected to revise down tomorrow growth in second-quarter gross domestic product to an annual pace of 1.4% from 2.4%, according to a Reuters survey.

Dallas Federal Reserve Bank president Richard Fisher told Fox Business Network that the US central bank decided to reinvest proceeds from its mortgage-related assets to avoid unintentionally clamping down on monetary policy when the recovery was showing signs of weakening.

The Fed, which has kept overnight interest rates near zero, has repeatedly said it stood ready to take further steps should the economic picture deteriorate. It announced this month that it would use proceeds from mortgage-related assets to buy longer term Treasury debt.

Some analysts said the drop in existing-home sales had been exaggerated by the end of the housing tax credit.

“We are seeing a bit of an over-correction from the end of the tax credit; we will probably see another month or two of this before we start the upward trend,” said Eric Fox, vice-president for statistical and economic modelling at Veros in Santa Ana, California.

“Later in the fall, we will probably be back to a more stable level. But at the same time, unemployment has remained stubbornly high and a lot of people are sitting on the sidelines until they see that there is a sustained recovery before they pull the trigger and buy a home,” he said. — Reuters

With home sales tumbling, the inventory of previously owned homes for sale rose 2.5% to 3.98 million units from June, representing a supply of 12.5 months – the highest since at least 1999 and up from June’s 8.9 months.

The jump in the supply of homes was almost double the six to seven months’ supply, given that has been historically consistent with stable prices.

Last month’s foreclosed properties accounted for 22% of sales while short-sales made up 10%. First-time buyers accounted for 38% of transactions, the lowest in 12 months.

The national median home price rose 0.7% from July last year to US$182,600.

By Reuters

Wednesday, August 25, 2010

Sime's Oasis Square sees good take-up

Demand has been strong for Sime Darby Property Bhd's RM1 billion Oasis Square project, the central business district of the Ara Damansara township in Selangor.

It has three 12-storey corporate office towers; five blocks of 10- to 12-storey retail outlets and office suites, called The Capital; two 10-storey serviced apartments, named Oasis Serviced Suites; and double-storey food and beverage kiosks with 15 outlets.

Managing director Datuk Tunku Putra Badlishah Tunku Annuar said the project has recorded impressive take-up rates since the launch of phases 1, 2 and 3 last year.

All the 288 shop-offices in Blocks A and B under phase one of The Capital development are sold. The take-up for Blocks C and D under phase three is 86 per cent and 93 per cent respectively.

Block E, which has some 88 units, is targeted to be launched in the last quarter of this year.

"The need for office space in prime locations is evident from the swift take-up of the business units," Tunku Putra Badlishah said.

The serviced apartment blocks with 326 units are 99 per cent sold at between RM440 and RM503 per sq ft. They were snapped up less than a year after its launch in April and May last year.

The one-bedroom studios, two- and 2+1 bedroom units range between 572 sq ft and 1,108 sq ft.

Upcoming launches include the Oasis Corporate Park, a mixed commercial development comprising office towers, retail space, serviced apartments, a hotel and a convention centre which is still in the planning stage.

Key products in the 306ha Ara Damansara project, launched in 1999, include the 400 resort condominium units under Ara Hill, the Seri Pilmoor semi-detached houses and bungalows, and the Ara Damansara Linear City.

Sime Darby Property has sold some 3,123 mixed development units, including double-storey link-houses, double-story semi-detached houses, bungalows, low- to medium-cost apartments and high-end condominiums.

By Business Times