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Tuesday, August 7, 2012

Two M’sian firms announce property projects in London in a week

PETALING JAYA: Within the space of only a week, two Malaysian companies have announced plans to develop property in London, underscoring the rising appeal of Europe's most iconic city as a safe haven in the current roiling global economy.

A progressively larger share of the world's capital whether from property firms or cash-rich investment funds has found its way to the global financial hub in recent times, hungry for stable returns in an otherwise anaemic, debt-strapped region.

On Wednesday, Amcorp Properties Bhd said it was entering into a joint venture (JV) to acquire a freehold office building in London's trendy Mayfair district, followed by IJM Land Bhd's Friday revelation of a mixed development on Royal Mint Street.

Analysts have favourably regarded IJM Land's latest venture, saying it diversifies the company's income stream from the current concentration in Malaysia.

To recap, IJM Land took a 51% stake in a JV with Lite Bell Consolidated Sdn Bhd for the project, which will buy a 999-year lease on a 2.7-acre site that has already obtained planning permission to be developed into 650,000 sq ft of gross floor area (GFA).

The site will be leased from Network Rail Infrastructure Ltd for some £20mil (RM97mil).

With a strategic location in the heart of London, the project will boast of “excellent views” of popular landmarks such as the Tower of London, Tower Bridge, Royal Mint Court, St Katharine's Docks and River Thames when completed, as well as superior connection to public transport, being above the National Rail and DLR railway lines.

It is just 1km off the city's financial centre known as the “Square Mile”.

The initial development plans involve a block of five-star hotel cum residences and three blocks of residential apartments with a combined gross development value (GDV) of £280mil (RM1.4bil).

In a filing with the stock exchange, IJM Land said the favourable exchange rate and lack of funding for property developers in London given the eurozone crisis provided a “window of opportunity” for its UK undertaking.

Affin Investment Bank said in a client note that the effective acquisition price of £30.80 per GFA was fair compared with the £74.10 paid by Sime Darby Property Bhd and SP Setia Bhd for the Battersea power station.

“The land cost to GDV ratio of 7.1% is also slightly more attractive than the 7.5% of SP Setia-Sime's acquisition.

“Importantly, we are generally positive on the medium-term outlook for London property given the strong interest from global buyers, including Malaysian high-networth individuals,” it explained.

Kenanga Research, meanwhile, opined that the guided GDV of RM1.4bil was conservative.

“Management is indicating average selling prices of £1,000 to £1,100 psf, which is saleable considering the area's pricing range of £1,000 to £1,500 psf.

“However, if we assume a very conservative 50% utilisation rate on the 650,000 sf of GFA with average selling prices of £1,000 psf, we arrive at a GDV of £325mil (RM1.6bil).

“We also understand that the group will maintain prices below £2mil per unit to avoid the higher stamp duty of 7% on any sales (usually 5% or less),” it noted.

The research unit added that there were no issues as far as funding was concerned, with IJM Land's net gearing expected to inch up to 0.1 times from a net cash position in its fourth quarter ended March 31, assuming a 70:30 debt-equity financing of the land and working capital of £30mil.

“The project will only be launched in the fourth quarter of the financial year 2014 (FY2014), implying significant earnings contributions from FY2015 onwards.

“In the short to medium term, the sales drivers will be from The Light Waterfront and its stable of mass housing projects (Shah Alam 2, S2@Seremban, Johor projects) plus its long-awaited township, Rimbayu, which is slated to have a GDV of RM11bil," Kenanga Research said, noting the launch preview for Rimbayu could take place this month.

It also pointed out that IJM Land is aiming to achieve RM1.5bil in sales in FY2013.

A weak pound, coupled with low interest rates, has helped propel institutional investors from the Far East to become the biggest buyers of central London office properties, real estate consultancy CBRE reportedly said last month.

Malaysia is now ranked second only to the US in a list of the top five investors in London by total investment volume between 2010 and the second quarter this year, with £2.35bil and £3.53bil ploughed in by both countries respectively.

Rounding off the list were Germany with £1.29bil, Saudi Arabia £969mil and Qatar £750mil.

By The Star

Mah Sing earnings forecast to hit RM209m

KUALA LUMPUR: AmResearch estimates that Mah Sing Group Bhd's earnings to rise from RM169 million in financial year 2011 to RM209 million in financial year 2012.

The forecast also includes RM260 million earnings in financial year 2013 and RM320 million in financial year 2014.

The research house said the estimation comes along with a three-year earnings compound 24 per cent annual growth rate, anchored by in-demand landed residential developments namely, M Residence 1&2 and Southville City.

"The group's earnings are very much secured with current RM2.5 billion unbilled sales," said the research house.

AmResearch said the annual pre-sales are expected to rise to RM3.5 billion in financial year 2013 and to RM4 billion in financial year 2014.

"The net gearing is expected to rise to 0.5 with one or two more land acquisitions by year end, but this is still within a comfortable level and should be pared down by its solid cashflows," it said in a research note.

AmResearch said Mah Sing has a 40 per cent dividend payout policy now and it expects the group to pay 11 sen to 15 sen dividend per share for financial year 2012 until 2014, translating to decent yields of four to six per cent.

The research house has put a "buy" rating, with RM3.60 fair value for the initiating coverage on Mah Sing based on a mid-cycle discount to its estimated RM4.80 per share net asset value.

By Bernama

Sunway REIT profit fell to RM420m in FY12

Sunway Real Estate Investment Trust's (Sunway REIT) pre-tax profit for financial year ended June 30, 2012, fell to RM420.46 million from RM553.66 million in the same period last year.

Revenue, however, rose to RM406.43 million from RM327.42 million previously.

In a filing to Bursa Malaysia today, Sunway REIT said the retail segment's revenue rose 23 per cent, or RM54.7 million, to RM292.3 million due to a rental reversion in Sunway Pyramid Mall and better contribution from Sunway Putra Mall.

It said the hotel segment registered gross revenue of RM71.6 million, an increase of 28.6 per cent, or RM15.9 million, compared with last year.

"The strong revenue growth was primarily contributed by Sunway Putra Hotel of RM9.1 million and hotel properties located in Sunway Resort City of RM7.3 million," it said.

Sunway REIT said the office segment for the financial year recorded gross revenue of RM42.6 million, up 24.6 per cent, or RM8.4 million, from last year, attributable to the addition of Sunway Putra Tower, which mitigated the drop in occupancy at Sunway Tower.

On prospect, it said domestic demand would provide the support to sustain the economy amid softer external demand.

Sunway REIT said it would continue with its capital management programme in view of the accommodative monetary policy and was committed to distribute 100 per cent of its distributable net income for the financial year ending June 30, 2013.

By Bernama

Pavilion REIT's earnings forecast raised

KUALA LUMPUR: Maybank Kim Eng Research has raised the financial year 2012-2014 earnings forecast of Pavilion Real Estate Investment Trust (Pavilion REIT)by eight to 8.4 per cent.

It also factored in a higher rental growth and turnover rent as well as higher occupancy rate.

Maybank Kim Eng in a research note today said Pavilion REIT's first half net profit of RM95.6 million was above the research house and consensus expectations at 55 to 56 per cent.

"This was due mainly to higher-than-expected retail turnover rent and rental hikes," it said.

Going forward, it said piling works of the Pavilion KL Mall extension will commence in the third quarter, whilst construction of the sub-urban mall in Subang Jaya is ahead of schedule.

"As for the Fahrenheit 88 mall, the management is monitoring the leases due for renewal in the third quarter, rental reversions and tenancy profile.

"When acquired, we expect these properties to raise Pavilion REIT's asset size by more than 41 per cent from RM3.6 billion currently," it added.

Maybank Kim Eng has maintained a "hold" call on Pavilion REIT but revised upward the target price to RM1.40 from RM1.26 previously.

By Bernama