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Saturday, June 16, 2012

UEM Land to bank on Nusajaya

It is a bold statement to make, but Datuk Wan Abdullah Wan Ibrahim, managing director and chief executive officer of UEM Land Holdings Bhd, does not mince his words when he says the company has “delivered on its promises”.

“When we got listed in 2008, we told the media and analysts where we were going,” he tells StarBizWeek in an interview.

“When the time was right, we raised almost RM1bil through a rights issue. Even before we were listed we did the de-gearing exercise with Khazanah Nasional Bhd.

“And because of our need to diversify in terms of location, which we were taking too long to do organically, we acquired Sunrise.”

The hotly-debated RM1.39bil takeover of influential ex-banker Datuk Tong Kooi Ong’s listed vehicle, which was Mont Kiara’s master planner, immediately solved a few strategic objectives.

“Among others, we needed the right brand and skill set. In those days, UEM Land was a township developer. We can build high rises, but at what level of class, efficiency and market intelligence?” Wan Abdullah asks.

“Via the Sunrise team, we had that practically overnight. They had a strong balance sheet and a good track record in not only product delivery but also the financial aspects.”

“Now,” he adds, “we just need to ramp up earnings.”

“We have a huge five-year target. Corporate governance rules do not allow me to share this, but you will probably laugh and think it is a bad joke. It’s a very steep growth trajectory.

“Our 2012 headline key performance indicators will give you an indication,” he says, referring to its target to achieve 50% growth in revenue, 40% in net profit and return on equity of 10%.

“Those are big numbers in a property climate which is uncertain as we speak. While we have all these constraints, we are still pushing ahead with our agenda. I believe we have very good prospects, and the single biggest factor we are hanging our optimism on is Nusajaya.”

The 23,875-acre Nusajaya, of which UEM Land is master developer, is one of five flagship zones in Iskandar Malaysia, the country’s first economic growth corridor.

Wan Abdullah enthuses: “SP Setia has said it is focusing on Johor, and Mah Sing is also reinvesting in Johor. These people can’t be wrong in their reading of the market and the demand.

“Everyone is rushing into Iskandar, and it is not by accident. We have been working day in and day out for this.”

The key to this growth, he points out, is two-pronged. There will be new catalyst projects unveiled towards the fourth quarter for Nusajaya, the likes of which investors and analysts got a peek of at the CIMB Asean Conference earlier this week.

In a research note, CIMB analyst Terence Wong says the management previewed Gerbang Nusajaya, a 4,500-acre, RM18bil gross development value (GDV) township envisaged as the gateway to Iskandar Malaysia for those entering from Singapore.

Some of its proposed projects include an AutoCity test track and a trade centre.

“UEM Land’s original blank canvas of 24,000 acres in Nusajaya is finally reaching a tipping point. Recent strong sales (85% take-up for Imperia and close to 100% for Somerset Puteri Harbour) attest to the attraction of the township,” Wong remarks.

“The company is the best play on Iskandar Malaysia as it has close to 8,000 acres of undeveloped landbank in Nusajaya alone, which lies in the heart of Iskandar Malaysia.”

It has also made two major land purchases totalling RM579mil so far this year, a sign that it is not resting on its laurels despite already being the largest private landowner in Johor.

In April, it bought 122.28 acres near Puteri Harbour for RM93.2mil from Tanjung Bidara Ventures Sdn Bhd, a wholly-owned subsidiary of Khazanah, to be developed into a premier residential enclave featuring canal-front homes and high-end condominiums.

The land actually forms part of a larger 4,500 acres it had disposed to Khazanah in a de-gearing exercise in 2006.

“We needed a white knight (at the time). In 2007, nobody cared about us. Our gearing was 18 times, how could I move forward? So we sold land to Khazanah at 5% above market,” Wan Abdullah explains.

“Now that five years have passed, we are in a position to take it back at a fair price.”

Another crucial focus for UEM Land, he adds, will be to create employment.

“For example, look at SiLC (Southern Industrial and Logistics Cluster). For the past four years we were happily selling industrial land. But when people buy these lots, they take their time to build the factories. We cannot allow our future to be determined by their fancy.

“We have to drive this ourselves. Because of that, we are at advanced discussions with an international industrial player to build an industrial park.

“We hope to sign the collaboration soon and will build factories to be sold or leased, so that when people buy them, they will immediately kickstart operations.”

The way he sees it, there is much opportunity for this because “Singapore is pushing out its small and medium enterprises”.

“It is not efficient for them to be in Singapore due to high cost and other reasons. We have the opportunity to receive all these new investments. I can jolly well continue to sell industrial land and make money, but that doesn’t serve the township as a whole.

“As a developer, we don’t just build, we have to script it right.”

On the firm’s regional expansion, Wan Abdullah says this is still “in its infancy”.

“When we spoke about expanding regionally, the analysts and fund managers got a bit excited, but not positively. They said, ‘These guys just learnt to start walking and now they want to run, and when they run too fast they are going to fall down and hurt themselves’.

“Give us more credit, we would not be so silly to do that. These are the early days. We are not going to jump in and buy 1,000 acres in India or Vietnam.

“But we have to start taking baby steps or people will say three years from now that we didn’t consider the region.”

Closer to home, UEM Land is set to launch the second phase of its Arcoris mixed development in Mont Kiara comprising 366 small office home office (SoHo) units.

Its business suites launched last year have been 100% sold out, according to UEM Land development division project director Raymond Cheah.

Wan Abdullah is quick to point out that Arcoris is only the third development in Malaysia to be designed by Foster and Partners, whose résumé include London’s iconic Gherkin tower and Wembley Stadium.

The other two projects designed by the architecture firm here are Universiti Teknologi Petronas in Perak and Bandar Raya Developments Bhd’s The Troika in downtown Kuala Lumpur.

The six acre, freehold, 1.44 million gross floor area Arcoris is UEM Land’s first development to feature five components, namely the SoHo, business suites, hotel, serviced residences, and retail. The latter three have yet to make their debut.

Cheah calls Arcoris the “last piece of the puzzle” in Mont Kiara. The SoHo will occupy 25 storeys of the south block, with sizes ranging from 500 sq ft to 1,000 sq ft.

Based on past records, the 700 sq ft units tend to be the most saleable, Cheah shares. Prices are between RM900 and RM1,000 per sq ft.

Market research done by UEM Land indicates that price-wise, the SoHo is within reach of 62% of the population.

Arcoris is geomancy-compliant and is seeking a green rating to boost its appeal. The RM960mil-GDV project is scheduled for completion by the first quarter of 2016.

A private preview will be held later this month before the public launch, Cheah notes.

Another feature to look out for is the hotel as it would effectively be the first in Mont Kiara, the nearest hotels being Eastin and The Royale Bintang The Curve.

“There is pent up demand that people may not be aware of yet,” Cheah says, referring to its potential to attract business travellers heading to Matrade’s upcoming one million sq ft trade and exhibition centre in Jalan Duta.

By The Star

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