I-BHD founder and executive chairman Tan Sri Lim Kim Hong has been in business for a great many years. Yet, he never fails to light up at the mention of his pride and joy the ambitious, steadily forming township of i-City.
With the exuberance of a young man, Lim, 62, is likely to take you by the hand and break into a short sprint as he points out upcoming attractions at his RM5bil, 72-acre development in Shah Alam, which was exactly what happened when StarBizWeek paid a visit there this week.
Seven years hence, I-Bhd's flagship project is set to harvest the first fruits of its labour.
I-City is currently best known for the rows upon rows of LED-lit trees that make a familiar backdrop to weekend family jaunts. The owners of the project believe this is the year it begins the journey to becoming a serious player in property development.
When finished, i-City will be many things to many people theme park, mall, hotel, residence, office and concert venue.
“We have over the past few years been working behind the scene to get all the approvals and infrastructure in place. We have that today, and moving forward we are going to reap the efforts of our investments,” group chief executive officer Datuk Eu Hong Chew asserts.
The story of i-City stretches as far back as 1993, when Lim bought a parcel of land in Section 7 of the then sleepy Shah Alam at RM4 per sq ft.
The freehold development is the brainchild of Lim, who has throughout his life been a trailblazer on many fronts despite adverse circumstances.
The youngest in a family of 10 children, he dropped out of school after standard six and worked in a furniture-making shop in his hometown of Muar, Johor, as an apprentice.
Lim later struck out on his own as a carpenter. At 21, he signed up as a mattress dealer with Dunlop and within a short time, he was the biggest dealer in the country. Soon after, Lim started Dreamland, Malaysia's first spring mattress brand, earning him the nickname “mattress king”.
Dreamland was subsequently listed in 1987 and Lim sold the business in 1993 for RM350mil. He invested the money in several regional ventures as well as in the land on which i-City sits.
I-Bhd, which is 61.2%-owned by Lim, used to be a white goods maker known as Sanyo Industries Malaysia Bhd before he acquired and renamed it in 1999.
His technology-based township, however, did not take off until 2005, hampered by the onset of the Asian financial crisis.
Today, Lim has the state on his side, so much so that it agreed to build three flyover interchanges that will link i-City to the Federal Highway, making it only the second development to have exclusive access to the bustling expressway after Mid Valley.
Not only that, the Shah Alam City Council has written to the Land Public Transport Commission requesting that one of the stations along the proposed Kelana Jaya-Klang line of the My Rapid Transit service i-City.
With only 20% of the construction in place, large tracts of bare land still dominate the landscape of i-City, although if everything goes on schedule, this will not be the case for much longer.
Day and night
I-Bhd will spend the next 10 years realising the masterplan designed by Jon A. Jerde, whose portfolio includes the ritzy Roppongi Hills neighbourhood in Japan and S P Setia Bhd's KL Eco City.
I-City is billed as an “international business hub by day and lifestyle haven by night”. Lim and his team are working to create an integrated mixed development the likes of which has no comparison in Shah Alam, and which many thought preposterous to do in a place better known for its sedate suburbia and factories than as a thriving nightspot.
“The perception then was that no one wanted to invest in Shah Alam,” recalls Eu, Lim's loyal aide of 20 years.
Because of this, i-City was a tough sell. Lim, for example, had to contend with an initially miniscule plot ratio of 1:3 and approved built up of five million sq ft, which would not allow the company to maximise its potential.
After much wrangling, Lim got the green light to raise i-City's plot ratio to 1:5, giving it a total gross floor area (GFA) of 13 million sq ft and RM5bil in gross development value (GDV).
I-City was the first and still the only private sector-led MSC status zone in the state.
It also signed a management and development agreement with the Selangor government to make i-City a “technopreneur campus”, which comes with a host of incentives such as a temporary occupation licence for some 30 acres of neighbouring land, 24-hour operation for approved outlets, lower bumiputra sales quota of 30%, and the expanded plot ratio.
“If you look at all the successful urban centres in the world, there is always a business as well as entertainment component. Look at Roppongi or Canary Wharf (in London). When you have both day and night activities, the place becomes vibrant,” Eu explains.
i-Appeal
The quarter ended June 30 marked the first time I-Bhd recognised revenue from the residential portion of i-City in its books. Its turnover in the second quarter improved 63% to RM10.94mil from RM6.71mil in the same period last year, and net profit to RM2.97mil versus a loss of RM129,000, boosted by a three-fold increase in its leisure segment and a one-off gain of RM1.8mil from the divestment of its i-Home trademark.
For the first half of the year, revenue climbed 73.5% to RM19.59mil from RM11.29mil, while net profit stood at RM3.79mil compared to RM294,000 of losses a year earlier.
In the notes accompanying its financial results, the firm said it recorded a profit of RM7.6mil from its leisure operations during the six months to June, which was triple the RM2.2mil achieved in the previous corresponding period due to stronger revenue from its upgraded SnoWalk, more visitors to the LED Lightscapes and new theme park attractions installed in the final quarter of 2011.
Nonetheless, Eu explains that the contribution from its leisure division, which has so far been I-Bhd's main earnings engine, should balance out as the company progressively receives cash from the sales of its residences.
“We have only accounted for less than 5% of our unbilled sales in the second quarter,” he points out.
I-Bhd in May launched 173 units of the West Wing of i-Residence, which has been fully sold. It unveiled last month a further 173 units of the East Wing in addition to 20 villas.
Also sold out were its 220 small office/versatile offices (Sovos), whose completion and handover is expected in two years.
In terms of pricing, Eu says i-Residence has set a new benchmark in the area at RM500 per sq ft.
Capital values in the vicinity, he adds, have appreciated in tandem. “When we were building in 2008, the semi-detached houses behind us were going for RM750,000 and RM300,000 for terrace homes. Now it has doubled to RM1.5mil and RM600,000.
“We have demonstrated that there is demand for high-rise living in Shah Alam, which has historically favoured landed property. When we wanted to do this, people were sceptical. But we have proven that if you have a nice product and environment, high rise is possible.”
Of i-City's total 13 million sq ft, 8 million has been carved out for residential-type dwellings, 2 million for the mall and three hotels, and the rest for offices.
I-Bhd plans to roll out RM500mil worth of projects with one million sq ft of GFA and hit RM500mil in sales per annum.
Eu calls i-City a “dual-track” project as the tourism and property development elements can operate independently of each other.
“Every developer wants a recurring income stream, that's how the theme parks came about,” he elaborates.
“Once everything is done, we will also receive recurring income from the investment properties, namely the mall, hotels and carparks.”
Quantum leap
By the middle of the next decade, after i-City has come to fruition, it is envisaged to have 30,000 knowledge workers, 25,000 residents and 40 million to 50 million visitors from five million now.
And while the small office/home offices (Sohos) and Sovos make up a significant chunk of its residences at 5.2 million sq ft, or 40% of the total built up, Eu does not think there will be a crunch in demand, citing the growing number of technopreneurs who eschew traditional offices.
In the near term, I-Bhd aims to launch 950 units of its RM300mil GDV Sohos in November alongside its Water World@i-City that will feature the country's only tornado ride.
Also in the works are a luxury 43-storey condominium sited on 1.1 acres in Kuala Lumpur's Golden Triangle in Jalan Kia Peng, which is slated to be revealed in the first quarter of next year, and Clarke Quay @i-City, the working title for what will be its riverfront complex inspired by the Singaporean tourist haunt of the same name.
“The authorities here are learning from Singapore and have decided to do away with the cemented banks of Sungai Rasau, which snakes past i-City. The plan is to widen and deepen the river to give it a natural look,” Eu explains.
The river will be the focal point for its leisure district comprising its one million sq ft regional mall, hotels, an amphitheatre and an F&B hub.
For the rest of the year, Eu is confident that the company can maintain its growth momentum.
He expects net profit to be double that of last year in the financial period ended Dec 31, 2012 (FY12) on the back of progressive recognition of unbilled sales from its apartments and better ticket sales from its rides and attractions with the looming year-end holidays.
In a May report, Kenanga Research estimates that I-Bhd could see solid earnings growth in FY12 and FY13 of over 100% to RM11.4mil and RM24.3mil respectively.
“For the past five years, the group has maintained its net cash position with a zero gearing balance sheet,” adds the research house, which has a target price of RM1.51 for the stock.
On dividends, Eu shares that there is potential for higher payouts in the future. It has been returning one sen to shareholders over the past two years for a yield of 1% to 3%.
“Last time we were thinking about how to settle the problems. Now we will settle shareholders,” Lim chips in.
For him, this is more than a business investment. “It is not only about returns. Without love, this will not be successful. Without love, we would have surrendered,” he says simply.
“The challenge for us now,” Eu sums it up, “is to continue to increase the GDV of i-City. We have 10 years left under the current plan. Our job is not to complete it, but to enhance it further so we will have many more years to go.”
By The Star
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