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Monday, June 27, 2011

Talam in uphill battle

TALAM Corp Bhd, once the country's largest builder of low- and medium- cost houses, has unfortunately been making headlines for the wrong reasons.

Recently, the company reported a net loss of RM25.97mil for its first quarter ended April 30, 2011 versus a net profit of RM1.57mil in the previous corresponding period, mainly attributable to lower progress billings generated from the development projects during the quarter under review.

Revenue for the period plunged 43% to RM13.18mil from RM23.26mil a year earlier.

Talam slipped into PN17 on Sept 1, 2006, after its auditors failed to provide an opinion on its results for the financial year ended Jan 31, 2006. The company had also defaulted on term loans and bond obligations.

Its debt-restructuring exercise involves three parts a capital reduction and a share split, the issuance of new convertible instruments to address certain defaulted debts, and a proposed asset divestment programme.

According to reports, most of the debts stemmed from joint ventures on land belonging to state agencies, such as subsidiaries of Kumpulan Hartanah Selangor Bhd, Permodalan Negeri Selangor Bhd and Pendidikan YS Sdn Bhd.

However, over the years, Talam had been striving to reduce its gearing level. In the first half of 2010, Talam entered principal and supplementary agreements respectively with Menteri Besar Selangor (Inc) (MBI) to dispose of RM676.09mil worth of properties in settlement, principally of RM391.99mil due to MBI and RM266.26mil due to lenders.

On a good note, in June 2010, Bursa Malaysia also approved Talam's application to be uplifted from PN17 classification. As at April 30, 2011, the company's borrowings and debt securities stood at RM695.57mil.

In its note to Bursa Malaysia accompanying its first-quarter results, Talam said it was still facing a huge challenge in the low- and medium-end property sectors.

“Despite the uncertainty in the property development market, the group will endeavour to undertake all necessary measures to mitigate the adverse effects on the liquidity position of the group,” it said.

The company, when contacted, declined to comment on its prospects.

One property analyst believes that Talam should consider focusing fully on high-end developments.

“Generally, low-medium-cost developments tend to reap low returns,” he said.

Talam also said in its announcement (accompanying its first quarter ended April 30, 2011) to Bursa Malaysia that it was committed to completing the remaining development projects undertaken and expected to deliver most of the sold units to the purchasers by the second quarter of this financial year ending Jan 31, 2012.

According to its 2010 annual report, Talam has a total balance land bank of approximately 5,047 acres, mainly in Selangor, comprising a mixed portfolio of commercial, residential and industrial properties at various strategic locations in Ampang, Sepang, Puchong, Bukit Jalil and Rawang.

Its existing projects, namely Taman Puncak Jalil, Ukay Perdana, Lestari Puchong, Kinrara Section 3, Jalil Heights, Saujana Puchong, Danau Putra, Putra Perdana, Saujana Putra, Lestari Permai, Bukit Sentosa and Bandar Bukit Beruntung have a combined gross development value (GDV) in excess of RM10bil.

It also has a project in the pipeline, namely its Berjuntai Bistari project, which is to be developed over 15 years and will comprise approximately 3,500 units of residential and commercial properties with an estimated GDV of RM350mil.

In its announcement to Bursa recently following its first-quarter results, Talam said other than its current development projects, the group would go into joint-venture projects with reputable corporations.

A property analyst said Talam could approach developers keen on strategic partnerships.

“Collaborating in a project is one way to create better value by leveraging on each other's strengths and expertise. However, it is imperative if both parties shared the same goals and values,” she said.

According to its annual report, Talam has four on-going joint-venture projects currently, but with its own units.

The projects include the 252 units of terrace houses at Ukay Perdana, which is a venture undertaken by 50%-owned Good Debut Sdn Bhd. The development is part of the Ukay Perdana project in the vicinity of Bukit Antarabangsa and has a gross sales value estimate of RM96.55mil.

Other joint ventures include the Serenia Garden residential development project undertaken by 50%-owned Sierra Ukay Sdn Bhd, which has a GDV of RM615mil; the Sierra Selayang residential project undertaken with 50%-owned Cekap Tropikal Sdn Bhd (which has a GDV of RM963.9mil) and the Yin Hai Complex project undertaken by Jilin Dingtai Enterprise Development Co Ltd, a wholly-owned subsidiary of Larut Leisure Enterprise Hong Kong Ltd, a 50%-owned associate of the Talam Group.

By The Star

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