Malaysia Property News is a free resource website sharing Daily Property News & information about Property in Malaysia, which related to, Property Market, Property Investment, Commercial Property , Hot Properties Malaysia, Real Estate, Retail Shop, Business Park, Condominium Malaysia, Terraces & Apartment Malaysia, Houses, Residence, Resort and many more.

Monday, November 29, 2010

MRCB to go big in the property sector

Malaysian Resources Corp Bhd’s activities are heavily concentrated in the Klang Valley with KL Sentral(pic) as its flagship project

PETALING JAYA: After nearly 30 years, Malaysian Resources Corp Bhd (MRCB) is poised to join the premier league of the property development sector via its proposed merger with IJM Land Bhd.

The company started in 1969, under the name Perak Carbide Sdn Bhd, with its core activity of carbide manufacturing. In 1981, it became known as MRCB, following a major shift in operational interests to property development and investment.

To recap, the government-linked company, with Employees Provident Fund (EPF) holding in excess of 40% stake, announced that it would team up with IJM Land under a newly incorporated company (Newco). The proposal will involve a share swap of MRCB and IJM Land with new shares in Newco.

Newco is expected to take over the listing status of both company in the second half of next year with implied market capitalisation of RM7bil and net asset of over RM3bil where it will emerge as the second-largest property developer in the exchange.

It was largely reported that it would be a synergistic merger given the different strengths of MRCB and IJM Land in the property market segments.

So, what does MRCB bring to the merger with IJM Land?

According to OSK Research, MRCB's activities are mostly in the commercial sector and heavily concentrated in the Klang Valley, with its flagship project KL Sentral with gross development value (GDV) of about RM12bil.

Its major shareholder, the EPF, is to undertake the development of the prized Rubber Research Institute (RRI) land in Sungai Buloh where we believed the merged entity may be the frontrunner to undertake the project on behalf of EPF, it said.

This announcement was made in Budget 2011, whereby the project would involve mixed development comprising affordable houses as well as commercial, industrial and infrastructure facilities. The entire development is estimated at RM10bil and is expected to be completed by 2025.

IJM Land, on the other hand, is more focused on township and residential developments in the Klang Valley, Penang, Johor, Negri Sembilan, Sabah and Sarawak with remaining landbank of 6,637 acres and remaining GDV of about RM22.85bil.

This landbank of IJM Land would complement the merger, as according to Kenanga Research, post-completion of KL Sentral, MRCB might not have another equally strategically located landbank and would only be counting on securing a role in EPF's RRI land development to have a significant new earnings stream.

OSK Research also believed the proposed merger might have been initiated by EPF as part of its efforts to consolidate its property exposure as well as to establish its own sizeable property arm.

Besides MRCB, EPF is also a common and significant shareholder in IJM Corp Bhd and IJM Land.

This, we believe, will enhance EPF's capability to achieve its goal of increasing its exposure in the property market as part of its investment diversification strategy, it said.

The EPF was recently quoted on the merging of IJM Land and MRCB as saying it would first have to evaluate the proposal before deciding on its position.

Based on current information, the EPF is slated to be the second-largest shareholder in Newco after IJM Corp, as the details of the new management structure has yet to be revealed.

On the offer price of RM2.30 per MRCB share on the merger share in Newco compared to RM3.65 per share for IJM Land, OSK Research said it's a fair offer price but not that attractive.

The RM2.30 offer price for MRCB offers only a 7% and 12.2% upside from the last closing price (before the merger announcement) and our previous fair value respectively.

As such, we view the offer price as somewhat fair, and yet not that attractive, owing to the rather limited premium or upside, it said.

Going forward, although Newco is expected to enter the premium league of property sector, the other players in the league are also stepping up in terms of size and capabilities apparent in the current trend of mergers and acquisition in the industry.

On Nov 4, UEM Land Bhd has proposed a merger with Sunrise Bhd, while last week Sunway Holdings Bhd and Sunway City Bhd received a takeover offer from Sunway Sdn Bhd for RM4.5bil in cash-and-share swap.

Thus, although the merger between MRCB and IJM Land is expected to create a giant in the sector next year, Newco is not alone in the battlefield as the other contenders would be equally strong.

By The Star

M-REITs on the acquisition trail

PETALING JAYA: Malaysian real estate investment trusts (M-REITs) are taking steps to expand their yield accretive potential and market capitalisation with a number of asset acquisitions underway.

Malaysian REIT Managers Association (MRMA) chairman Stewart LaBrooy said there was a resurgence in activity in the M-REIT sector and the acquisition trail had commenced in earnest.

In the list include AmanahRaya REIT's planned acquisitions amounting to RM497mil; UOA REIT's RM500mil asset purchase plan; KPJ Al-'Aqar REIT's purchase eight hospitals amounting to RM383mil and an Australian nursing home for RM135mil; and Axis REIT's purchase of four major assets worth RM238mil, Stewart said.

Steward LaBrooy ... ‘it would be important that M-REITs have sponsors who can provide a pipeline of projects or stock to the REIT vehicle at reasonable returns during these times.’

According to Stewart, M-REITs are getting set for a re-rating and REITs which are actively growing and have high liquidity would be rewarded with a better premium than those that have not.

On his outlook for M-REITs in 2011, he said if the property market remained bullish through next year, it is going to be difficult to manage to get yield accretive yields as we are evidencing a compression in the yield curve.

Stewart said it would be important that M-REITs have sponsors who can provide a pipeline of projects or stock to the REIT vehicle at reasonable returns during these times.

With the uncertain outlook of inflation and the falling US dollars, investors are moving into hard assets like property as a hedge resulting in the rising property prices, he added.

The current high liquidity in the capital markets in Asia has led to a boom in equities on Bursa Malaysia.

Stewart said in such an environment, the regional bourses, including Bursa Malaysia, have outperformed the REITs around the region, including in Malaysia.

However, selected M-REIT stocks have seen their share prices rise and in some cases prices have touched record highs as risk-adverse investors clamour for yields in a market that was getting more risk adverse.

Stewart said demand for M-REIT units by both institutional as well as retail investors was growing as evidenced by the successful listing of Sunway REIT and CapitaMalls Malaysia Trust in July. This was because there was still a strong arbitrage of 300 basis points in the returns for REITs when compared with Government bonds and 400 basis points when compared to bank fixed deposits.

Disclosing that there was some RM244bil held by individuals in fixed deposits and a further RM80bil held in savings accounts, he said much of the work of the MRMA was to explain to the retail investors that they should seriously consider M-REITs as an investment class.

As the M-REITs emerge from trading below their net asset values to trading above them they now can efficiently raise capital to purchase assets without diluting unit holders. The number of M-REITs that are trading at a premium to NAV is increasing.

Stewart said the issue of liquidity was however a concern, adding that many of the REITs did not have the liquidity to attract global investors who required that average daily turnover on the local bourse per counter exceeds US$1mil a day.

Many stocks are still tightly held and we have to get much larger in terms of number of units in circulation and market capitalisation of at least US$500mil to qualify. It is good to note that M-REITs are taking steps to increase their size and market capitalisation and this has resulted in a total market capitalisation of RM10bil now, he pointed out.

On initiatives by the MRMA to raise the competitiveness of M-REITs, Stewart said the association had made representations to the Finance Ministry and Pemandu (Performance Management and Delivery Unit) to get a tax regime that was aligned with Singapore, such as waiving the 10% withholding tax for resident and non-resident individuals, but did not succeed in the 2011 budget.

We will continue to have dialogues with the regulators. We will be meeting next month to approve the proposals from our Regulatory Sub Committee that will lay out proposals for regulatory reforms for M-REITs. All these moves will bode well for the industry. Malaysia leads the region by having such an association as MRMA, he said.

By The Star

KL plans RM1b Islamic property trust

Pelaburan Hartanah Bumiputra Bhd, a unit of a Malaysian government foundation, said it will start a RM1 billion Islamic property trusted to enable the country’s so-called bumiputeras to invest in real estate.

Bumiputeras, comprising ethnic Malays and indigenous people, will able to invest in the trust for a minimum RM500, Pelaburan Hartanah said in a statement today.

Pelaburan Hartanah is a unit of Yayasan Amanah Hartanah Bumiputra, a foundation created by the government for real estate investment in 2006.

By Bloomberg

HSBC Amanah: Islamic REITs drawing Gulf investors

DUBAI: More syariah-compliant real estate investment trusts (REITs) will come to market in Asia in early 2011 as cross-regional Islamic investors increasingly embrace the product, HSBC Amanah Malaysia's new head said.

Singapore's first syariah-compliant REIT, Sabana REIT, listed last Friday, has drawn a mixture of both conventional and Islamic investors, a quarter of them from the Middle East, chief executive officer Rafe Haneef said last Friday.

"The take-up (among Gulf investors) for future Islamic REITs will be a lot greater than that," said Haneef, who is also managing director of global markets for HSBC Amanah.

"At the moment there is no timeline for when other issuers will come out with Islamic REITs, but I would expect more in the first or second quarter of next year," he said.

HSBC Amanah was exploring other Islamic REIT opportunities in Malaysia and Singapore, Haneef said, noting it was financial adviser for the Sabana REIT initial public offering (IPO).

Sabana REIT sold 508 million units at S$1.05 (RM2.51) each in its IPO last week. The IPO was 2.5-times subscribed. Sabana REIT's shares closed at S$1.02 (RM2.44) on the Singapore stock market, after being weighed down by jittery market sentiment.

By Reuters

RM1b Amanah Hartanah Bumiputera launched

PELABURAN Hartanah Bhd (PHB), a subsidiary of Yayasan Amanah Hartanah Bumiputera, today launched a RM1 billion investment fund to help Bumiputera entrepreneurs own properties.

The "Amanah Hartanah Bumiputera" launched by Prime Minister Datuk Seri Najib Tun Razak is open to Bumiputera entrepreneurs with an initial investment of only RM500.

"Under the Syariah-compliant investment scheme, Bumiputeras will indirectly have an opportunity to own equities in major properties. The unit trust will be sold at RM1 a unit," said PHB managing director and chief executive officer Kamalul Arifin Othman at the launch of the scheme.

He said PHB was collaborating with Maybank to facilitate smooth transaction of the scheme.

"Bumiputera entrepreneurs who are keen to participate in the scheme can go to the 400-odd Maybank branches nationwide to buy the AHB units," he said.

On AHB returns, Kamalul Arifin assured investors that the returns would not be less than six per cent per annum based on the property sector's performance at the Golden Triange area.

He said the PHB would continue to identify business opportunities through acquisition of premier assets and developing properties particularly in the commercial property development sector.

"We are also looking to grow the fund size by another RM500 million by next year," he added.

Established in May 2006, PHB is an investment holding company, which currently owns properties worth in excess of RM1 billion in and around the Klang Valley.

By Bernama

KL site for Accor's largest hotel in S-E Asia by rooms

COME July 2011, Malaysia will house Accor's largest hotel in Southeast Asia by rooms.

French hotel operator Accor, which operates brands like Sofitel, Novotel, Mercure and Pullman is opening a 513-room five-star hotel in Bangsar, Kuala Lumpur.

General manager Patrick Sibourg said that the hotel, the Pullman Kuala Lumpur Bangsar, will also become the flagship for the Pullman brand in Southeast Asia.

In a recent interview with Business Times, Sibourg said that the hotel will be the third Pullman brand in Malaysia after Kuching and Putrajaya.

Based on the room configuration and the success of the Pullman brand here, the group decided to adopt this brand to target the business crowd.

It hopes to woo both the domestic and the foreign corporate businesses, especially those who visiting offices within a twenty-minute driving radius of the hotel.

Being a hotel that focuses on business, it also has a ballroom with a 1,400-capacity and ten meeting rooms.

"The performance of Hilton Sentral, Le Meridien and Hilton Petaling Jaya shows the growing confidence in the market here," Sibourg said.

"We expect to have a 60 per cent occupancy and an average room rate of RM320++ by the end of December 2012," he added.

Sibourg hopes to see occupancy rise by between 2 and 3 per cent each year.

The hotel will have some seven restaurants, cafes and bars. Since it will also be big on meetings, the hotel expects to have some 500 staff.

Revenue split from room and food & beverage is expected to be equal.

Sibourg anticipates gross operating profit to be about 30 per cent in the first year of operation.

Pullman has a 12-year contract with the developer Cygal Development Sdn Bhd. The hotel will be located in Tower 3.

Cygal Bhd (which has changed its name to Sycal Ventures Bhd) started the construction of the building in 1995 but was stalled during the 1997/1998 economic crisis.

Telekom Malaysia Bhd bought Tower 1, Plaza Cygal in early 2005, and later that year TM bought Tower 2 from the owners.

By Business Times