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Friday, September 9, 2011

Sime's planned E&O purchase gets analysts' thumbs up

KUALA LUMPUR: Sime Darby Bhd's planned purchase of a 30 per cent stake in Eastern & Oriental Bhd (E&O) last week will revive its flagging property business and also give it exposure to the Penang and Johor markets, analysts said.

For JP Morgan, the deal signals a more aggressive strategy from management to improve the property division.

"Sime's property division has generally been viewed as lacking push or not as aggressive as the purer developers.

"As it is, in the recently announced 2011 results, the property division was the underperformer with a 7 per cent year-on-year contraction in profits due to delays in obtaining approval for launches," it said in a research report.

Deutsche Bank AG said Sime is not present in the Penang property market currently and the deal would allow collaboration to enhance its property business in the long run.

Analyst Eltricia Foong said property development is estimated to account for 7 per cent of Sime Darby's 2012 operating profit.

"We reiterate our hold recommendation on Sime shares with a target price of RM9.30," the analyst said, adding that funding should not be a worry given its solid balance sheet and its recent RM690 million fabrication yard sale.

Sime Darby has proposed to buy the 30 per cent stake last week for RM766 million.

In Johor, E&O has a joint venture with Khazanah Nasional Bhd and Singapore's Temasek to develop a 84ha wellness township.

By Business Times

Ireka to buy Kajang land

IREKA Corp Bhd, a property developer, plans to buy a parcel of freehold land in Kajang for RM22.43 million cash.

The land, measuring 83,339 sq metres, is located within the Bukit Angkat Industrial Zone and is intended for a gated and guarded mixed-use industrial development, said Ireka in its filing to Bursa Malaysia yesterday.

“The concept for this development is in the preliminary stage, no submissions have been made to the authorities yet.

The total development cost and expected profits will be determined after the development order has been obtained at a later stage,” it said.

By Business Times

Juasa, Insan Tiasa to develop RM6.8b land

Utusan Melayu (Malaysia) Bhd's wholly-owned subsidiary, Juasa Holdings Sdn Bhd, has entered into a joint venture agreement with Insan Tiara Sdn Bhd to develop a RM6.8 billion land in Kuala Lumpur into a mixed commercial industrial project.

Utusan said the completion of the project, consisting an eight-storey building with sub-basement and two floors of car park, shall be within four years from the delivery of vacant possession of the property with a further extension of two years.

"The proposed project will enable Utusan to enhance the value of its existing property and create a new source of income from property rental," it said in a filing to Bursa Malaysia today.

By Bernama

Risk profile change for Bandar Raya Developments

PETALING JAYA: The proposed sale of Bandar Raya Developments Bhd's (BRDB) investment properties to major shareholder Ambang Sehati Sdn Bhd will have a negative effect on BRDB's business risk profile over the longer term, according to RAM Ratings.

In a statement yesterday, it pointed out that should the proposed deal go through, BRDB would be divesting all of its investment properties, which have been providing a stable source of recurring rental income.

“The divestment will steer BRDB towards becoming a pure property developer. This, in our opinion, heightens the group's business risk,” said RAM Ratings.

By The Star

Shanghai banks tighten mortgage lending paper

BEIJING, Sept 9 (Reuters) Chinese banks in Shanghai have either stopped mortgage lending or are making it harder to get loans, the official China Securities Journal reported on Friday.

The central bank's recent move to widen the base of total deposits that banks must set aside for reserves further crimped banks' ability to lend, while record high home prices are also making them nervous, the newspaper said, citing unnamed banking sources.

Banks in Shanghai that the newspaper visited have taken various steps including halting mortgage lending, extending loan approval times because of tight quotas, excluding applicants whose homes are old or expensive or raising mortgage rates beyond regulatory requirements, the paper said.

China has rolled out a slew of measures since late 2009 to curb property speculation and rein in runaway housing inflation.

So far, they have yielded some results and there are growing signs that home prices are starting to fall in some cities where they have gained rapidly in the past few years.

The top banking regulator has constantly warned against lending to the real estate sector, but has also repeatedly reaffirmed that Chinese banks could withstand home price falls of up to 50 percent.

By The Star

London's hotspot property prices to double

LONDON, Sept 9 (Reuters) Property prices in some central London hotspots are set to more than double by 2016, driven up by a mix of factors including volatile financial markets and major new transport projects such as Crossrail, according to a report from estate agency Knight Frank.

Domestic and overseas buyers have flocked to the London residential market in recent years as they look for a safe place to park their money.

"It's really seen as safe haven for global money. We ran some figures showing how prime property is doing in terms of asset classes ... it beat the FTSE 100 tracker over the last 10 years by quite a long margin," said Grainne Gilmore, Knight Frank's head of UK residential research.

"It certainly gives gold a run for its money," she added.

Meanwhile the Crossrail development, Europe's largest infrastructure project, will link Heathrow west of London to the east of the city through huge new tunnels to be run under the city.

"Crossrail is a massive theme going through this ... it's going to change a lot of things. If you live in Barbican or Farringdon (adjacent to the City financial district) you're going to be able to get to directly to three airports within minutes," she said.

As a result prices in this area and the City are set to rise 118 percent by the end of 2015, second only to the Vauxhall area in south London, where prices are forecast to jump 140 percent thanks to the redevelopment of Battersea Power Station along with U.S. plans to build its new London embassy just down the road.


The Knight Frank report added that there are 13 hotspots which will outperform even the 30 percent increase in prices expected in prime central London by the end of 2015.

But the gap between prime central London prices and the rest of the country is widening, as growth has already soared over 10 percent this year.

"There is a possibility we could see strong doubledigit growth by the end of this year ... the figures just keep getting stronger," said Gilmore.

House prices have fallen in all areas of England and Wales in the past 12 months, except London, with prices falling nearly 9 percent in the north east region, according to recent data from the Land Registry.

"We definitely wouldn't class what is happening at the moment as a bubble ... The fundamentals of the market in London are quite different to what they were in the rest of the UK (before the property crash)," Gilmore added, as buyers are cashrich and not reliant on cheap credit.

Even last month's riots have failed to put off buyers from all over the globe, which account for just under half of investors, said Knight Frank, attracted by the political and fiscal stability and high standard of education in the UK.

In a separate statement earlier this week, CB Richard Ellis said sales rates in London had improved for prime products and apartments with growth potential.

"The top end of the market is attracting such a wide range of buyers from all over the world that it is in effect insulating itself from any one economic cycle," said Jennet Siebrits, head of Residential Research at CBRE.

The highestselling develpment schemes so far in 2011 have had exhibitions in Asia as buyers in Hong Kong take advantage of a currency discount of about 20 percent.

Meanwhile major regeneration projects add nearly 5 percent to house prices in neighbouring areas, according to new research from CBRE, with the 2012 Olympic Games development lifting prices by 14 percent in the surrounding area.

By The Star