Are mega projects necessary?

Despite some misgivings from certain quarters, many would view the government's launching of mega projects as an attestation of its commitment towards transforming the economy.

LAST month, the government fired the first salvo by launching seven mega projects under the Economic Transformation Programme (ETP). These projects are part of the 131 entry point projects identified under the government's ambitious roadmap to be carried out over the next 10 years.

Despite some misgivings from certain quarters, many would view the government's launching of mega projects as an attestation of its commitment towards transforming the economy.

Malaysia's economic performance will be affected by many factors including its economic and monetary policies as well as external and domestic demands.

In the past, most Asian countries prospered by adopting explicit industrial policies that focus on building its manufacturing prowess.

Apparently, the contours of the new industrial policy seem quite different today. There are four key policy parameters that the government needs to consider when designing new economic strategies - establishing sound industrial policies that cater to global demands; enhancing its human resource and capital development; adopting aggressive economic policies to strengthen its economic performance; and improvising the nation's physical and social infrastructure.

The goal of the government's economic strategies is simple - create jobs and increase its per capita income by accelerating the economy.

The Asian experience tells us that no country can accelerate its economic growth unless it is willing to invest in major infrastructure projects.

The major allocation to better roads, power supply, transportation and physical infrastructure is part of the government's grand strategy designed to stimulate the economy and restore both the private and public sector's confidence.

The multiplying effect will lead to more jobs being created as a result of the huge investments.

Indeed, investment spending in construction projects have a strong correlation to the rate of economic growth and future prospects.

Economists will agree that demand for construction projects reflects a healthy economy while declining growth implies an economy that is declining.

The construction of tall skyscrapers across many major cities such as South Korea's world tallest twin towers due for completion by 2014, Shanghai with its 121-floor skyscraper, and Mumbai with the 125-storey India Tower and 117-floor World One is a testimony of the importance of the construction sector as a measurement of a vibrant economy.

Since construction is often financed by borrowings that comprise short-term bank credit and long-term bond markets, the aggressive transactions within the capital market will rejuvenate market activities and ultimately lead to opportunities for reforms in the financial system, including improvement of corporate governance, reinforcement of regulatory and supervisory arrangements.

There will also be several visible effects on the economy. The government's active participation in the physical development of the nation directly implies the government's commitment towards improving the country's standard of living. The investments will also stabilise the investment climate while signifying a message of economic vibrancy to foreign investors.

The government has also not lost sight on other factors that contribute to economic growth. Economic growth can only occur when a country has sufficient human capital.

In today's industrial era, accumulation of a nation's wealth is no longer created by machines but human labour, thus the need for the economy to be knowledge-driven.

The knowledge to complement the government's economic agenda combined with the depth of technology embedded in the nation's human capital will decide on the success or failure of the economy. To instil a knowledge-driven economy is no mean feat because it involves major reforms that pervade at every facade of the economy - its social, educational and economic policies.

The ultimate mission is to create a "learning economy" where new technologies are applied and innovation remains the primary goal.

No efforts should be spared to ensure that the country's vision to foster life long learning is rigorously enforced at every level of our society.

The construction sector is seen as the first "battleground" for the government to instil its knowledge-driven economy agenda because of the massive manpower that will be utilised during the projects.

Already more than RM100 billion has been allocated for construction development that comes hand-in-hand with an additional RM1.5 billion on researches and development.

The government has also directly fostered competition among local construction firms by increasing the size of the construction sector while bringing pressure for organisations to innovate because technologies are needed in the wake of fierce competition among local companies.

Firms that aspire to win government-initiated projects will be forced to acquire and utilise advance technological know-how to compete locally, which in turn will mould local firms to be more internationally competitive in addition to generating higher returns and greater growth potential.

Competition will also breed innovation while technological knowledge will spread quickly across many firms to innovate.

In economic terms, the focus on construction development is seen as an attempt by the government to avoid "market mismatch" when supplies cannot fulfil the demand, as the economy becomes more vibrant.

In anticipation of future needs, the onus will be on the government to provide better quality residences to cater to the growing population of city dwellers that is expected to exceed more than 10 million over the next 10 years. There will be more demands for new commercial and retail properties, including better amenities, comprehensive civic facilities and an efficient transportation system.

There is a clear consensus that Malaysia needs an explicit industrial strategy to pursue its economic agenda and the government has identified 12 new key economic areas that need encouragement including the construction sector. The development of the city's physical infrastructure through investments in mega projects has been identified as the first thrust, a process that will revitalise the construction sector, spur the growth of SMEs, offer massive employment opportunities, increase net capital stock, improve labour efficiency and enhance the robustness of the capital market. Are these not enough reasons to justify the need for mega projects?

The writer is an associate professor with the Graduate School of Business, Universiti Sains Malaysia.

By Business Times

UEM Land: No plan to raise bid for Sunrise

UEM Land offered RM2.80 per share in an all-share deal but Sunrise shares rose 28 per cent to close at RM3.22 yesterday.

UEM Land Holdings Bhd has no plans to raise its bid for Sunrise Bhd after the latter's share price jumped above the offer price yesterday.

It offered RM2.80 per share in an all-share deal but Sunrise shares rose 28 per cent to close at RM3.22 yesterday.

Although major shareholders with a 40.34 per cent stake have agreed to the offer, UEM Land still needs another 9.7 per cent for the deal to happen.

"We believe the current market price of Sunrise is only reflecting the proposed dividend announced, the proposed offer structure and the pricing of our offer to acquire Sunrise at RM2.80 per share," UEM Land said in response to Business Times' questions.
Sunrise shareholders are offered 1.33 UEM Land shares for every share they hold, priced at RM2.10 each.

"As such, any increase in UEM Land share price, will result in a proportionate increase in Sunrise share price as to reflect the proposed structure and pricing," it added.

Shares of UEM Land rose 10.2 per cent to close at RM2.49 yesterday.

Most analysts think the offer, which values Sunrise at RM1.4 billion, is low.

AmResearch Sdn Bhd said the offer means UEM Land is getting Sunrise at a 28 per cent discount to its estimated net asset value (NAV) of RM3.89 a share.

OSK Research said there is a 31 per cent discount to its 2011 target price of RM4.33, based on the offer price and after adding the recently-announced net interim dividend of 20 sen.

But ECM Libra reckons that not everything can be based on numbers in this deal, as the fact that major shareholders are accepting could mean a lack of growth prospect for Sunrise.

Datuk Tong Kooi Ong, a major shareholder of Sunrise, is staying in a senior management role in the enlarged group.

"As such, the question to ask is whether the existing major shareholders of Sunrise expect positive value creation from this exercise," ECM Libra said in a report.

Analysts also think that the deal may spark more takeovers in the sector.

There is speculation of a deal between IJM Land Bhd and Bandar Raya Development Bhd (BRDB).

BRDB, famed for crafting thriving communities like Bangsar, has land surrounding its CapSquare development and along the Federal Highway.

MIDF Research senior analyst Syed Muhammed Kifni thinks that Sime Darby Property Bhd and Mah Sing Group Bhd would be a good fit.

By Business Times

UEM Land takeover bid draws mixed views

PETALING JAYA: Analysts have mixed views on UEM Land Holdings Bhd’s RM1.4bil takeover offer for Sunrise Bhd, with some of them saying that UEM Land will emerge “the bigger winner”.

Having already secured 40.34% of the voting shares, if its bid succeeds, UEM Land will become one of the largest property developers in the country, with land and projects in Iskandar Malaysia, the Klang Valley and abroad.



Last week, UEM Land proposed a conditional takeover to acquire all the equity shares in Sunrise at RM2.80 per share via a share swap of 1.33 UEM Land shares at RM2.10 for each Sunrise share or a share swap of 2.8 redeemable convertible preference shares (RCPS) at RM1 for each Sunrise share.

In terms of land, the enlarged group would have expanded its acreage from 4,164 acres, of which 98% are in Iskandar Malaysia, to 4,741 acres with 86% in Iskandar, 9% in Mersing and 5% in the Klang Valley. This acreage will exceed that of SP Setia Bhd, which has 3,453 acres.

The enlarged entity will also have a combined gross development value (GDV) of RM27.6bil. On its own, UEM Land has a GDV of RM20bil, about the same as IJM Land Bhd, which has over 5,000 acres.

Three out of five analysts said the takeover was “attractive” for Sunrise shareholders. Their views also differed on which was a better option for shareholders.

OSK Research said while the share-for-share swap offered most reward potential, it was not without risk as the the entities had very different culture with one being a government-linked company under Khazanah Holdings Bhd and the other a pure breed private sector animal. Merging their operations would be herculean.

Accepting the RCPS had limited downside risk as the RCPS could be redeemed at face value by UEM Land two years later.

“However, as the RCPS will not be listed, there will be no early exit for the investor and he must take into account the potential opportunity cost involved,” OSK said.

Another option was to cash out on or after the Nov 18 ex-date of the recently-announced 20 sen interim dividend and invest in other property stocks as OSK believed the Malaysian property sector was on the verge of positive re-rating over the next 12 months and investors may find more attractive options elsewhere.

ECM Libra Research said an analyst briefing on Nov 4 suggested that the main reason for Sunrise executive chairman Datuk Tong Kooi Ong to sell his stake was the landbank constraint of Sunrise.

At another analyst briefing several months earlier, Tong indicated that he was taking Sunrise onto a new strategy with multiple products and multiple locations.

While its joint venture with Sime Darby group in Bukit Jelutong, Shah Alam and its projects in the Kuala Lumpur city may be part of this strategy, ECM Libra said with this turn of events, the “potential for (the) enlarged entity to reap synergistic benefit of large landbank (UEM Land’s) and the development exeprtise and strong branding Sunrise” was there.

Tong will take up a board seat in UEM Land and remain as Sunrise chairman. He will also chair the development committee in the enlarged group. ECM Libra said despite the unattractive takeover offer, valuation wise, not everything could be quantified in this particular corporate exercise.

“The question we have to ask is whether the sale of stakes by major shareholders especially Tong, who is instrumental in the success of Sunrise, signifies the lack of growth prospect going forward and thereby (led to) their exit,” said ECM.

However, that Tong would continue to play a crucial management role in the enlarged group begged another question – would the existing major shareholders of Sunrise expect positive value creation from this exercise, that is, the consideration shares in UEM Land to be worth a lot more in two years despite its current stretched valuation, the research house asked.

Meanwhile, shares in Sunrise and UEM Land jumped when trading on Bursa Malaysia resumed yesterday following a two-day suspension last week to announce UEM Land’s takeover plan.

UEM Land gained 23 sen to its all-time high of RM2.49. The counter has risen more than 102% year-to-date.

Sunrise gained 27.78%, or 70 sen, to RM3.22, its highest since Jan 29, 2008 when it hit RM2.80. It was the second most traded stock on Bursa with 44.7 million shares exchanging hands. Year-to-date, Sunrise has gained more than 56%. Its closing price yesterday was much higher than the offer price of RM2.80 by UEM Land.

An analyst believed UEM Land would easily secure 50% acceptances level but doubted if the company would revise the offer price so soon.

He said investors could be buying into Sunrise yesterday due to the dividend which was announced last week.

Apart from the net dividend, analysts were unsure on the reason behind the rise in Sunrise’s share price. Investors could easily buy into UEM Land if they wanted to buy Sunrise as a proxy to the former.

Based on yesterday’s closing of RM3.22, 1,000 Sunrise shares cost RM3,220 and 1,000 UEM Land shares, RM2,490. Under the direct share swap, the 1,330 UEM Land shares received for 1,000 Sunrise shares would be worth RM2.42 each. In contrast, purchasing the 1,330 UEM Land shares directly would cost RM3,311.70, or RM2.49 each.

Another analyst said there was no guarantee that UEM Land would make a better offer in a subsequent round, if any.

By The Star

1Shamelin mall to have more than 1,000 stores

The much anticipated 1Shamelin mall in Cheras is scheduled to be completed by the second quarter of 2011 with a host of amenities set to bring in shoppers.

A sneak preview of the nine-storey mall located at Taman Shamelin Perkasa was held recently for the media at Westin Hotel in Kuala Lumpur.

The new mall boasts a gross build up of one million square feet with over 1,000 stores with 1,500 carparks for some 500,000 residents who lived nearby.

For entertainment shoppers can choose from Tanjong Golden Village Cinemas (TGV), One Pioneers Badminton Academy, Amp Square Karaoke to CYC Mega Leisure.

According to the mall’s senior complex manager Wong Chee Keong, fashionistas will enjoy themselves at the street bazaar located at the Lower Ground, Ground and Upper Ground floors.

“We have young entreprenuers who are arbiters of style and fashion who will start their own business. We hope they take up this opportunity and share their successes with us,” he said.

There are also themed zones such as Trendy & Fashion, Cyber & Lifestyle, Integrated, Eateries & Snack, Beauty & Pamper, Health Care & Academic as well as Sports & Entertainment.

Shoppers can also enjoy the gastronomic delights that will be available 24 hours by alfresco eateries surrounding the mall.

“Usually, shopping centres adopt two stages and stage two involves expansion with increased lettable area adjacent to existing spaces. In our case, we have two stages that will be developed at the same time,”Wong said.

The phase two is right above phase one and will have three extra floors dedicated to the entertainment and sports hub.

The third floor will house a supermarket and household stores, the fourth floor will have the badminton academy, health care, sports and lifestyle retail stores while the fifth floor is dedicated to TGV with eight screens.

For badminton enthusiasts, the badminton academy with 14 courts led by Malaysia’s top badminton players Wong Choong Hann, Lee Wan Wah, Chew Choon Eng and Chan Chong Ming will be a must try.

For now more than 50% of the retail outlets have been taken up.

By The Star

Mah Sing: Local property market sustainable

KUALA LUMPUR: Mah Sing Group Bhd is confident the local property market is sustainable as the current buying activities are backed by economic fundamentals and genuine purchasers.

“Despite Bank Negara’s measure to cap the loan-to-value ratio at 70% for third and subsequent house purchase, the prevailing low interest rate, healthy employment market and the fact that property investments have proven to be a reliable asset class will continue to sustain and drive the sector,” group managing director and chief executive Tan Sri Leong Hoy Kum said.

The Government’s Economic Transformation Programme to pave the way for the country to become a high-income nation will also boost demand for properties in economic hot spots that include the Greater Kuala Lumpur, Penang and Johor.

Leong said careful market studies to match supply with demand was necessary to make sure that the products offered meet market needs in terms of concept and design.

“It is important to invest in research and development to continuously create a healthy, sustainable and eco-friendly lifestyle. Other attributes include good locations, unique concepts and on-time delivery of quality products,” he told StarBiz.

Leong said gated and guarded landed properties seemed to be the most sought after, both for new launches and the secondary market.

“Besides a good location, buyers today place more importance on security, concept, design and lifestyle.

“The current price trend for link homes in good locations are approximately RM700,000 onwards for double-storey link homes and RM1mil onwards forthree-storey link homes,” he added.

Leong said Mah Sing was confident of chalking up sales of more than RM1.5bil this year after having turned in RM1.02bil for the first seven months this year from projects in the Klang Valley, Penang and Johor.

As at June 30, the company had unbilled sales of RM1.17bil, nearly twice the revenue recognised in 2009.

“Our landed properties generally attract local buyers, and our serviced residences have a higher quantum of foreign buyers due to ease of maintenance,” Leong said.

As part of the company’s marketing strategies, Mah Sing takes part in property exhibitions locally and overseas as they are good brand-building campaigns.

“We look forward to the upcoming Star Property Fair on Nov 19-21 at the Kuala Lumpur Convention Centre, and will be showcasing some of our latest projects at the fair,” he added.

The company currently has 15 ongoing projects while 10 projects are at various stages of planning. Its existing projects include One Legenda and Hijauan Residence in Cheras, Garden Residence in Cyberjaya, Perdana Residence 2 in Selayang, Icon Residence Mont’ Kiara, Aman Perdana in Meru-Shah Alam, Southgate, StarParc Point, iParc@Bukit Jelutong and iParc 2@Shah Alam in Kuala Lumpur and Klang Valley, Legenda@Southbay and Residence@Southbay in Penang island as well as Sri Pulai Perdana 2, Sierra Perdana and Austin Perdana in Johor Baru.

Those in the drawing board include M Suites @ Jalan Ampang, Kinrara Residence and Kinrara joint venture project, Garden Plaza in Cyberjaya, Star Avenue@D’Sara in Sungai Buloh, Icon City in Petaling Jaya, iParc3@Bukit Jelutong, and Bayu Sekamat in Hulu Langat in Kuala Lumpur and Klang Valley as well as Southbay Plaza and Icon Residence in Penang island.

Mah Sing is previewing its second project in Cyberjaya, namely Garden Plaza comprising Garden Suites (residential) and Garden Retail which are lifestyle retail shops.

The project-awareness exercise has attracted more than 2,000 registrants for the Garden Suites. Comprising fully-furnished small to medium-sized units that will be furnished and in move-in condition, the units are targeted at both users as well as investors looking to tap the vibrant student population in Cyberjaya which is currently in excess of 17,000.

The indicative price for the smallest unit of 500 sq ft starts from RM236,800 and there are flexible sizes to meet various requirements.

Leong said the company’s medium to medium-high end properties, including M-Suites@Jalan Ampang, received overwhelming response during its preview. M-Suites offers freehold apartments from 502 sq ft to 1,630 sq ft which are designed specifically to provide easy ownership and ensure long-term rental demand – criteria which appeal to both investors and residents alike when investing in the city.

The residential landed projects in Cyberjaya, Selayang and Bandar Kinrara had also attracted positive response. Garden Residence in Cyberjaya comprises two- and three-storey superlink and semi-detached as well asthree-storey bungalows. The gated and guarded project has been very successful, with sales hitting RM419mil as at July this year. Meanwhile, Perdana Residence 2, a gated and guarded project in Selayang, achieved more than 98% in take-up rate since its launch in March.

Kinrara Residence, a mixed residential development comprising super links, semi-detached units and executive bungalows priced from RM708,800, has also garnered positive response.

The gated and guarded development offers a communal lifestyle living with a clubhouse equipped with facilities such as swimming pool, wading pool, changing rooms, gymnasium and a community centre.

By The Star

Property: No specific theme this year

We don’t want developers over-emphasising on certain areas only, says FIABCI M’sia president

PETALING JAYA: After several years, the International Real Estate Federation (FIABCI) has decided that it is not going to have a specific theme for its Malaysia Property Award (MPA) this year.


Yeow Thit Sang

“There won’t be a theme for this year’s property awards because we don’t want to see developers over-emphasising on certain areas only,” said FIABCI Malaysia president Yeow Thit Sang (pic).

He said FIABCI Malaysia wanted to award developers that “excelled at everything.”

“In previous years, whenever there we had themes, many developers neglected certain aspects of their projects and we don’t want to see that happening.”

Yeow said FIABCI Malaysia also aimed to create more recognition for small, unheard of developers not just locally but also internationally. “There are many developers in Sabah and Sarawak, for instance, that nobody has heard of but are of world-class standards.

“By participating in the MPA, and going on to represent the country on the global stage at the International Prix d’Excellence, helps build their reputation and credibility,” he said.

FIABCI Malaysia is also more than just an organiser or annual property awards. According to Yeow, it was often a “voicebox” for property players to engage with the Government.

“We also address issues concerning the property industry. We meet with the Government regularly to express our views on how to improve the sector.”

Yeow said during the global financial crisis that occurred in September 2008, FIABCI Malaysia’s views were consulted by the Government on matters relating to the stimulus package.

On the awards, Yeow said all of this year’s entrees deserved top marks for their projects and their efforts. “The standard of the local property sector has increased tremendously,” he said, adding that there were over 50 entrees for this year’s MPA.

Yeow said over the years, FIABCI Malaysia had been encouraging local developers to reduce its impact on the environment as much as possible.

“Environmental awareness is a global issue. Local developers that consider the wellbeing of the environment into consideration will go a long way,” he said.

FIABCI Malaysia will be organising the 2010 MPA on Nov 11 in Kuala Lumpur with Malayan Banking Bhd as the official sponsor.

The categories to be contested are: Property Man of The Year, Master Plan, Hotel Development, Office Development, Public Sector, Residential Development (low rise and high rise), Resort Development, Retail Development and Special Award for National Contribution.

Winners of the MPA in their relevant categories will represent Malaysia the following year at the International Prix d’Excellence, an annual competition that honours the world’s best property projects.

By The Star

Developer offers greener living experience in Putra Nilai

NILAI: GD Development Sdn Bhd is undertaking a mixed development, Green Beverly Hills in Putra Nilai, that could potentially generate a total of RM5.3bil in gross development value (GDV) when completed in eight years.


Datuk Yeat Sew Chuong

Its joint chairman Datuk Yeat Sew Chuong said the project, which comprises residential properties and commercial properties as well as a hotel, would be developed in seven phases.

“The first phase comprises the development of 334 condominium units and 61 bungalows.

“Our condominium project is over 75% taken up even before the official launch today and we plan to launch our bungalows in two months,” he told StarBizWeek yesterday at the launch of Green Beverly Hills.

The condominiums were priced from RM380 to RM580 per sq ft and piling work started last month, he said, adding that the first phase development would generate a total GDV of RM315mil.

“Green Beverly Hills is located on 350 acres freehold land in Putra Nilai, which is the new name for Bandar Baru Nilai, a distinct and well-planned integrated township with modern infrastructure and amenities,” he said.

He added that Green Beverly Hills offered a greener living experience.

Located 15 minutes from Putrajaya and the KL International Airport, and 30 minutes to Kuala Lumpur city centre, Putra Nilai is already known for its up and coming biotech hub, regional education hub and trading/commercial hub.

Yeat, who is also chief executive officer of Bursa Malaysia-listed INS Bioscience Bhd, said GD Development was a joint venture between him and Tan Sri Gan Kong Seng, chairman of Nilai Resources Group Bhd in their personal capacity. The project did not involve INS, said Yeat.

Gan is also joint chairman for GD Development.

“This is my personal investment and I will responsible for the property development while Gan is the land owner,” Yeat said.

By The Star

UEM Land bid gets 40% votes

KUALA LUMPUR: UEM Land Holdings Bhd’s proposed takeover of Sunrise Bhd for RM1.39bil, or RM2.80 per share, has received an acceptance level of 40.3% from three major shareholders of Sunrise.

UEM Land managing director/chief executive officer Datuk Wan Abdullah Wan Ibrahim said the group had received irrevocable undertakings to accept its offer from Datuk Tong Kooi Ong, Tan Sri Tan Chee Sing and Datuk Lim Kim Huat

According to filings with Bursa Malaysia, Casa Unggul Sdn Bhd (a company controlled by Tong) owns 24.41% stake in Sunrise. Other shareholders include Phoenixflex Sdn Bhd (8.46%), Lim (7.24%), Tong (0.22%) and Tan (0.01%)

“We do not intend to maintain the listing status of Sunrise if the public shareholding spread of Sunrise is not met pursuant to the offer,” Wan Abdullah said at a briefing to announce the takeover offer on Thursday.

He said the proposed takeover was conditional upon UEM Land receiving valid acceptances of more than 50%.

“If we don’t get that (50%), we will take a walk (from the deal),” he said.

UEM Land will take the necessary procedures to withdraw Sunrise’s listing status if it secures more than 75% acceptance.

However, Wan Abdullah was confident the deal was “primed for success” given that the group had already received 40% acceptance level.

He said there were synergies between the two companies as UEM Land was a township developer while Sunrise was a niche high-end developer.

Sunrise has a market capitalisation of some RM1.24bil (as at Nov 2) while UEM Land is currently the country’s largest property company with over RM8.23bil in market capitalisation.The combined market capitalisation of Sunrise and UEM Land will be close to RM10bil.

UEM Land will be offering Sunrise shareholders two options under its proposed takeover offer.

Under the first option on share swaps, Sunrise shareholders will receive 1.33 UEM Land shares priced at RM2.10 apiece for every Sunrise share held.

The redeemable convertible preference shares (RCPS) option will see UEM Land issuing Sunrise shareholders RCPS at RM1 each based on 2.8 consideration RCPS per Sunrise share.

The RCPS, with a tenure of two years, will not be entitled to dividends and will not be listed.

The RCPS are convertible into UEM Land shares at RM2.30 per share anytime during their tenure and are redeemable at 100% of their issue price only at maturity.

Assuming that a shareholder holds 1,000 Sunrise shares and opts for option one, he would receive 1,333 UEM Land shares. If he were to opt for option two, he would receive 2,800 RCPS.

While some analysts said UEM Land’s offer was a positive proposition, other analysts were less optimistic.

An analyst said the merger may be a catalyst for further appreciation in UEM Land’s share price.

Another analyst said given that both companies had very different operating environments, it would take some efforts to merge their operations.

“I guess anything is possible at the moment. It makes business sense to merge as UEM Land develops townships while Sunrise builds high-end properties,” an analyst said, adding that they may have to resolve some cultural differences between the two.

ECM Libra head of research Bernard Ching said at first look, the takeover offer price of RM2.80 significantly fell short of its revised net asset value (RNAV) estimate of RM3.46 for Sunrise.

“But taking into account the net interim dividend of 20 sen, the total return to Sunrise shareholders is actually RM3, just 13% short of our RNAV,” he said.

On paper, shareholders who prefer to cash out could opt for the RCPS but would have to wait two years before redemption.

“However, we believe shareholders are better off selling Sunrise shares on or after the ex-date of interim dividend on Nov 18 if they wish to cash out. This is because of the opportunity cost over two years since the RCPS will not be listed,” Ching said.

Despite this, Ching believed the RCPS offered a “more attractive entry into UEM Land” as it was essentially a synthetic call option on UEM Land shares which would allow Sunrise shareholders to benefit from the upside of UEM Land shares but with limited downside risk.

Post-takeover, assuming 100% acceptances under the share swap option, Tong, Tan and Lim would end up with 6% in UEM Land and other Sunrise shareholders 9%. UEM Group Bhd will have a 65% stake in UEM Land and the balance 20% by other UEM Land shareholders.

On the other hand, if the RCPS option gets 100% acceptances, upon the RCPS’ full conversion, Tong, Tan and Lim would hold a 11% stake in UEM Land, other Sunrise shareholders 17%, UEM Group 56% and other UEM Land shareholders 16%.

The RM2.80 offer price represents a premium of 11% to Sunrise’s last trading price of RM2.52.

However, the offer price represents a premium of 30.4% to the 1-month volume weighted average price of Sunrise shares to Nov 2, after taking into consideration the interim dividend of 20 sen announced on Wednesday.

UEM Group Bhd group managing director/chief executive officer Datuk Izzaddin Idris said the offer, if successful, would result in the creation of an enlarged property developer with significant size, complementary expertise, capabilities and an asset base of about RM5bil.

On the rationale, UEM Land said the group’s vast land bank in Nusajaya was expected to be the engine for growth and sustainable income over the mid- to long-term.

However, as the Nusajaya projects were still under various stages of development, UEM Land’s current/historical profitability was not reflective of the value potential of such land holdings.

The proposed exercise is expected to provide immediate enhancement to UEM Land’s earnings as it would be able to consolidate the financial results of Sunrise and leverage on its strong existing pipeline developments.

“By leveraging on Sunrise’s robust financial strength and prospects, UEM Land is expected to be better positioned to accelerate its own business expansion and to secure new development projects,” UEM Land said in a statement.

Wan Abdullah said the group faced geographical risk as most of its landbank was in Johor and thus needed to diversify its landbank.

He said the acquisition would allow UEM Land to participate in Sunrise’s developments in the Klang Valley including Mont

Kiara/Dutamas, around the KL City Centre and its upcoming projects in Kajang and Shah Alam.

Meanwhile, Tong said he was excited at the prospects of Sunrise being part of the enlarged UEM group.

“Together, the new entity will have the size, means, capabilities and management experience and foresight to offer more comprehensive and diversified product range not just in Malaysia but regional as well,” he said.

Upon completion of the offer, Tong, who is executive chairman of Sunrise, will be appointed director at UEM Land. He will also chair both companies’ development committees together with Izzaddin and Wan Abdullah

Izzaddin and Wan Abdullah would be appointed to the Sunrise board with the latter assuming the position of managing director.

Asked if the merger was his way out, Tong said it was “hardly an indication” that he was getting out as he would remain on the Sunrise board as chairman.

“Realistically, for me to try to make Sunrise as huge and be a regional and global player the likes of CapitaLand may be impossible, or may take the rest of my life,” Tong said.

By The Star

BRDB in tie-up to expand presence in Nusajaya

KUALA LUMPUR: Bandar Raya Developments Bhd (BRDB), which recently signed supplemental agreements with UEM Land Bhd, the master developer of Nusajaya, to buy a 60% stake in a special-purpose vehicle used for the development of Residential North in Puteri Harbour, is planning to expand its presence in the township.

The project, on a 111-acre freehold parcel, would be launched in the third quarter of next year and would be completed in six phases over seven years. The expected gross development value (GDV) for the project is RM2.3bil.

BRDB chief executive officer Datuk Jagan Sabapathy said the partnership with UEM Land was just the first step in a strategy to grow the company’s presence in Nusajaya, the flagship township of the special economic zone of Iskandar Malaysia in Johor.

The signing of the agreements was a follow-up to the July announcement by BRDB of the acquisition of the stake in Haute Property Sdn Bhd, the special-purpose vehicle set up for the Residential North project, from Dubai World, the emirate of Dubai’s flagship investment arm.

BRDB paid RM75mil for the stake and would be advancing a further RM70mil to Haute Property for the developmental rights to the project after Dubai World pulled out as a result of the global financial crisis.

“We’re still looking at a couple more tie-ups within Nusajaya, we’re taking a longer-term view of the region and its prospects,” Jagan told StarBizWeek.

He added that besides Nusajaya, the company still had about 300 acres undeveloped in the 1,400-acre freehold Bandar Baru Permas Jaya, also in Johor, where it recently launched the 35-acre Straits Residences, a strata-titled landed project.

Jagan said among projects in the pipeline for the Klang Valley was a 25.25-acre freehold plot slated for commercial development in Subang Jaya next to the Federal Highway, which the company acquired for RM125.86mil in early 2008.

“The plans have been submitted to the relevant authorities and we’re also contemplating acquiring a neighbouring plot of land to build a railway stop for the project,” he said.

Besides Subang Jaya, he said other projects in the pipeline included the first phase of the Hartamas II condominiums located north of Mont Kiara which, according to earlier reports, could have a GDV of RM300mil next year.

As for its overseas ventures, Jagan said the company, in partnership with Defense Housing Authority of Lahore, had completed the first residential phase in the 400-acre Defense Raya together with the golf course.

“We’ve also launched smaller residential units but we feel that the situation in Pakistan has to settle down first,” he said, referring to the country’s volatile political situation.

By The Star (by Fintan Ng)

NEO Bankside property within potential landmarks

Last year, property agency Savills Rahim & Co introduced the first phase of NEO Bankside, a British property located in prime central London, to Malaysians.

The first block, known as Pavilion A, had prices starting at £1,000 per sq ft for a one-bedroom apartment of slightly more than 500sq ft.

It did seem pretty steep when most of the British properties being marketed in Malaysia were priced at about £200,000 for a one-bedder. Nonetheless, of the 80 units that comprised block A and B, Malaysians bought 10 units of NEO Bankside.



About two weeks ago, the agency marketed the third block. Prices have upped about 10% to 15% from last year. Located south of the River Thames, NEO Bankside is located in South Bank, in an area that runs along the southern edge of the Thames from Westminster Bridge to London Bridge.

Jointly developed by Native Land Ltd and Grosvenor, the 200-unit project is located in what is known as the cultural hub of London.

Gray was in Kuala Lumpur recently to touch base with buyers from the previous phase and to unveil the third of the four-block project.

Native Land development executive Nicholas Gray says notable features in the vicinity include art museum Tate Modem, Blackfriars Bridge and Station which spans the river, a new mall One New Change which is due to open in 2012, a second Hilton hotel with 280 rooms and the Borough Market, known to be London’s oldest market.

The area of South Bank has undergone tremendous change over the last 10 to 15 years. Similar with what’s taking place in several parts of London, NEO Bankside is part of the huge regeneration process that is under way there.

Like other parts of the capital undergoing regeneration – where old derelict buildings are torn down and new buildings take their place – South Bank has over the years boasted some of the finer names in architecture.

The catalyst for the area is Tate Modem, formerly a derelict power station. Today, the art museum receives millions of visitors every year.


The other catalyst is the Millennium by Sir Norman Foster. (Foster designed the Troika, a project by BRDB Bhd in the KLCC area).

A new mall One New Change, about 10 minutes walk from NEO Bankside, will be another landmark in South Bank. The most ecclesiastical of NEO’s neighbour will be St Paul’s Cathedral across the river.

South Bank and its surroundings on both sides of the Thames have brought together some of the most famous architects. Among them Sir Christopher Wren (St Paul’s), Tate Modem (Giles Gilbert Scott and Jacques Herzog) and Richard Rogers for NEO. Rogers is also the architect for One Hyde Park, one of the most upmarket real estate in London at £6,000 psf.

Gray says the main qualities of NEO Bankside are its quality, both in terms of design and construction, its location in the city by the river and the landmarks around it, on both sides of the Thames.

Says Gray: “There is a lot of development by the river. Some of them will become landmarks in years to come.”

Native Land is specifically a prime central London developer, which is different from a house builder.

In Malaysia, when one buys into a project, most of the time, if not all the time, it is a project undertaken by a developer. In England, the situation is slightly different. There, developers and house builders also undertake projects.

Both Native Land and Grosvenor are developers. Native Land was formed seven years ago by the former senior management of Taylor Woodrow Capital Developments and it is today a residential and mixed-use developer.

Grosvenor’s expertise is in prime London residential market and it has total assets worth £12.6bil.

NEO Bankside is located in what property consultancy Knight Frank says is a maturing market. In its review of South Bank, its head of residential research Liam Bailey says South Bank has succeeded in creating its own identity and cemented its reputation as London’s cultural hub, a sentiment reflected in its contemporary architecture and physical landscape.

He says residential demand on South Bank is currently identifiable from two key sources – overseas purchasers and cash-rich domestic buyers.

“The weaker pound alone has created a compelling buying opportunity for international purchasers,” the report says.

A significant driver for investment comes from educational requirements.

South Bank is within a 30-minute tube ride of seven universities including The London School of Economics, Central St Martins and Goldsmith’s.

Most of the Malaysians who have bought British properties do so because they have children studying there. Other international buyers invest for the same reason. Over the past decade, the number of international students studying in Britain has risen by 175%.

The strongest growth comes from China, India and Pakistan. The number of Chinese students rose 11.7 times from 4,017 in 1998/99 to 47,035 in 2008/09.

In many cases, investors look to buy to cover the period of their child’s stay at university, and the properties are then retained as a long-term investment, the Knight Frank report says.

Diversification is the other reason for their investment. Many view the current global financial crisis as a once-in-a-lifetime event and the fall in the Sterling presents itself as a buying opportunity.

With fears of price bubbles in China, Hong Kong, Singapore and even in Malaysia, governments in these countries have already taken steps to cool the prices.

“Their success, or otherwise, will have repercussions for the central London market. Initial feedback from our Asian teams suggests that there is a strong potential for the negative impact of lower housing wealth in Asia to be at least partially offset by a desire for investors to target safe haven locations such as London,” the report says.

By The Star

Residents against more commercial buildings

Eyesore: Ara Damansara residents are worried that the proposed developments would end up like this abandoned Platinum Damansara project along PJU1A/3.

MORE talk of hijacked institutional land surfaced during a public hearing at the Petaling Jaya City Council (MBPJ) headquarters recently.

About 20 Ara Damansara residents attended two back-to-back public hearings to raise their concerns about the proposed development of two projects on PJU 1A/20.

The session was chaired by MBPJ councillor Tiew Way Keng and attended by officers from the engineering and town planning departments.

The same group of residents had earlier attended two briefing sessions by the developers and had raised several issues regarding the projects.

The proposed projects on two adjacent pieces of land were:

— The Villamas project comprising two office blocks of 11 and 13 storeys, one 14-storey service apartment with two storeys of retail podium; and

— The Ara Green wellness and healthcare city comprising six blocks of 15-storey buildings, one block of 12-storey service apartments, one four-storey medical centre and two storeys of retail podium.

Among some of the issues they raised during the first two rounds of dialogues were traffic congestion, safety, risk of abandonment, drainage and risk of flooding.

The residents, led by representative Shawn Chong put up an impressive presentation to back their objection to the projects.

He said residents had obtained the master plan of the Ara Damansara area from the developer of their residential area, which showed that the plots of adjacent land on which the developments would take place was meant for recreation and had been sub-divided and sold without their knowledge.

“The land where the now-abandoned Platinum Damansara project stands was meant for a secondary school and the site of the Taipan 1 commercial area was meant for a primary school,” he added.

StarMetro in June had highlighted a similar case in Bandar Utama, where at least 12 plots of land surrendered to the state for institutional purposes was now being used for commercial buildings.

“We have no schools in Ara Damansara now and we have to drive quite a distance to send our children to school,” said one resident at the hearing.

Subang MP Sivarasa Rasiah’s aide Peter Chong, who was also present at the hearings, said the hijacked land was a state government issue and he suggested that residents file a complaint with the Special Select Committee on Competence, Accountability and Transparency (Selcat).

“If they find that there is abuse in the transfer of land, then the matter can be taken to MACC,” he said.

On other matters, residents said there were already many commercial lots in the area that were unoccupied.

They also raised the point that the developer of the first project was not the owner of the land, which made its application invalid.

“Both developments will be tapping into the existing infrastructure such as sewage treatment and water supply, and our developers have told us that the infrastructure that they put in place is only for their own development,” said Shawn.

Residents even created a three-dimensional simulation of how the traffic flow would be along Jalan PJU1A/20 if both of the projects under objection were allowed to be carried out.

Shawn said that many of MBPJ’s proposal to ease traffic congestion in the area had not even been implemented. Among them are:

— Opening of the Jalan Tropicana Link;

— Installing traffic lights at the Jalan PJU 1A/4A and Jalan Subang junction;

— Construction of elevated road crossing NKVE from Ara Damansara onto the Damansara-Puchong Highway;

— Connection of missing links between Jalan Lembah Subang and Jalan PJU 1A/1; and

— Widening of Jalan Lapangan Terbang Subang near Subang toll.

Residents were also not satisfied that the first developer had not submitted any traffic study for their development.

“According to the traffic study submitted by the second developer, the traffic condition of Jalan Lapangan Terbang during rush hours was already currently at level F, which is the worst level. What is going to happen once the the few ongoing developments are ready and these two projects are allowed to go ahead?” said resident C.P. Lim.

After the two hearings, another group of Ara Damansara residents attended a third one regarding another development located near the NZX commercial centre, comprising one 28-storey tower, 21 storeys of service apartments and two storeys of retail shops.

Tiew said the applications for the projects would be tabled at the One-Stop Centre committee meeting on Nov 15.

By The Star

UEM to take control of Sunrise for RM1.4b

UEM Land Holdings Bhd, the country's largest property developer by market value, plans to take control of rival Sunrise Bhd in a RM1.4 billion deal as it aims to be one of the biggest players in the region.

"That's our vision, to have our own version of CapitaLand," said UEM Land managing director and chief executive officer Datuk Wan Abdullah Wan Ibrahim in a media conference in Kuala Lumpur today.

Singapore’s CapitaLand is one of Asia’s biggest property developers with presence in over 20 countries.

The deal, which confirmed a Business Times report on Thursday, values Sunrise at RM2.80 a share, an 11 per cent premium to Sunrise's last traded price of RM2.52.


Deputy Chief Executive Officer Employees Provident Fund (EPF) Shahril Ridza Ridzuan and Group Managing Director/CEO of UEM Group, Datuk Izzaddin Idris at the press conference today. Pix by Mohd Khairul Helmy

According to UEM Land, 77 per cent owned by UEM Group Bhd, the deal will immediately boost earnings. It also allows UEM Land to take part in Sunrise's development in the Klang Valley. It will also strengthen UEM Land’s presence abroad.

"For example, we have a very nice piece of land in South Africa, it's a very strategic location, right at the harbour front. And now, we have the expertise to do it.

“Previously, it's quite daunting to think of I am going to build another Mont Kiara (in South Africa), but who is going to do it? Who are we going to send there?' Now, we can deploy the entire (Sunrise) team," said Wan Abdullah.

Major Sunrise shareholders, led by Datuk Tong Kooi Ong, Datuk Allan Lim and Tan Sri Tan Chee Sing, who collectively hold a 40.3 per cent stake, have agreed to UEM Land's offer. But UEM Land needs to have more than 50 per cent of Sunrise for the takeover to happen.

If more than 75 per cent of Sunrise shareholders accept the offer, UEM Land plans to take Sunrise private.

Tong, who was also present, expects the deal to be well received by investors even though it may mean a delisting of another entity on Bursa Malaysia.

"It will excite the market, because now we will actually have a very large property developer in Malaysia, a company that has lots of land bank, lots of potential, the right backing, a company that now has a nice brand and expertise.

“I think it will get a lot of foreign institution interests into the stock. Therefore I think it is positive for the capital market," said Tong.

The offer will be satisfied in one of two ways. The first option, known as the share alternative, is the offer of new UEM Land shares priced at RM2.10 each.

The second option, known as the cash conversion method, involves the issue of redeemable convertible preference shares at RM1 each.

After the deal is completed, scheduled at the end of the first quarter next year, UEM Group's shareholding in UEM Land will fall to between 56 per cent and 65 per cent, depending on the number of shares or preference shares issued.

Major shareholders led by Tong will also have stake of between 6 and 11 per cent in UEM Land.

But the parties admitted that there are concerns over the possible clash of corporate cultures.

"Mergers are clearly beyond P&L (profit and loss)... It was a major issue when this (the deal) was contemplated, but I think we have spent considerable amount of time thinking about this issue and thinking through this issue.

"What we will try to do is we'll try to allow the structure and the people in the two organisations to go parallel and not to force a merger. And then over time, to allow the interaction among the two parties, to feel comfortable with each other first, then crossing each other's boundaries," explained Tong.

The Sunrise brand will also be maintained.

"We will retain the Sunrise brand, because it is of great value. We don't intend to butcher it, certainly," said Wan Abdullah.

By Business Times

UEM Land to buy Sunrise for RM1.4b

Sources say the all-share offer values Sunrise at RM2.80 a share, 11 per cent higher than Tuesday's closing price of RM2.52

UEM Land Holdings Bhd plans to take over rival Sunrise Bhd in a deal valued at some RM1.4 billion to expand and develop the expertise to build and market luxury properties.

Sources said the all-share offer values Sunrise at RM2.80 a share. This is 11 per cent higher than its last closing price of RM2.52 on Tuesday.

Three major shareholders, including Datuk Tong Kooi Ong, who hold more than 40 per cent of Sunrise, have agreed to the deal, which is structured as a voluntary general offer.

"UEM Land needs the expertise in luxury development. They don't have the marketing capabilities," said one of the sources.
Sunrise, valued at RM1.25 billion currently, is well known for its high-end development at Mont'Kiara. Although its market value is half that of UEM Land, its net profit is bigger at RM134 million in the financial year to June 30 2010.

UEM Land is valued at RM2.45 billion and its net profit in the financial year to December 31 2009 was RM115 million.

Shares of both UEM Land and Sunrise have been suspended from yesterday until 5pm today. UEM Land is due to hold a press conference today to announce a mega corporate exercise.

The deal means that shareholders of Sunrise will still be able to profit from the potential future earnings of the combined group.

UEM Land is the developer of Nusajaya in Johor.

The company has 3,400ha of undeveloped land in Nusajaya, targeted to be developed by 2025.

It is also learnt that Tong will become a director of UEM Land and he will also chair the development committee of the group.

By Business Times

UEM Land buying stake in Sunrise?

KUALA LUMPUR: UEM Land Holdings Bhd is believed to be acquiring a substantial stake in Sunrise Bhd following requests for a trading suspension of their shares today pending an announcement.

According to filings with Bursa Malaysia, UEM Land and Sunrise have requested for the trading suspension that started at 9am yesterday to end at 5pm today.

In separate statements, the companies each said it would announce a “corporate exercise”.


Datuk Wan Abdullah Wan Ibrahim is expected to give details today.

In its statements to the stock exchange, UEM Land said it had requested for a trading suspension pending a “material announcement on a potential corporate exercise”.

Attempts to get UEM Land to comment were unsuccessful while a Sunrise representative said the company was not able to disclose details of its material announcement.

Market talk has it that the acquisition by UEM Land would be made via a share swap. According to analysts, there could be share swap between the companies which eventually could result in UEM Land becoming a substantial shareholder in Sunrise.

Another analyst said there were lots of speculation in the market currently. He said the acquisition could result in UEM Land privatising Sunrise. “If so, I’d imagine that UEM Land will issue shares to buy into all of Sunrise. Whether it’ll be fair to minorities depends on the mechanices of the swap.”

However, it is not certain whether the deal will be a straight share swap or share swap with cash option to Sunrise shareholders.

It is unclear what price UEM Land will pay for Sunrise, whose share price has been on an uptrend since Oct 27.

According to Sunrise’s latest annual report, Casa Unggul Sdn Bhd is its single largest shareholder with a 24.41% stake. Casa Unggul is a company controlled by executive chairman Datuk Tong Kooi Ong. The Employees Provident Fund Board has 12.61% voting shares in Sunrise.

Analysts said Tong did not address the potential corporate exercise with UEM Land at Sunrise’s analysts briefing yesterday to announce its quarterly results.

In a media advisory yesterday, UEM Land said it was “set to embark on a mega corporate exercise” with details to be announced today by managing director/chief executive officer Datuk Wan Abdullah Wan Ibrahim.

UEM Group Bhd group managing director/chief executive officer Datuk Izzaddin Idris is also expected to be present at the briefing.

Sunrise closed at RM2.52, its highest in 12 months, prior to its suspension yesterday. The counter has gained more than 22% year-to-date.

UEM Land has appreciated more than 84% year-to-date. It closed at RM2.26 ahead of the suspension.

Meanwhile, Sunrise is upbeat on its prospects for the current financial year ending June 30, due to its substantial unrecognised revenue of RM863.8mil as at Sept 30.

“The profits from these projects will be recognised over the current and subsequent financial years. The group is planning to launch new residential and commercial projects in the near future in order to sustain longer term profits,” Sunrise said in the notes accompanying its results

Sunrise posted a slightly lower net profit of RM36.7mil for the three months ended Sept 30 compared with RM37.3mil a year ago.

In a filing with Bursa, Sunrise said its pre-tax profit surged to RM52.2mil from RM50.2mil and earnings per share fell to 7.41 sen from 7.52 sen before. It also announced an interim dividend of 26.67 sen per share less 25% taxation amounting to RM99mil or 20 sen per share.

Revenue for the period was lower at RM171.3mil from RM190.3mil a year ago.

“Despite lower turnover, higher pre-tax profits were achieved on the back of higher margins and lower operating costs for the quarter under review,” Sunrise said.

The main contributors to the group’s financial performance for the quarter were its ongoing residential and commercial developments.

ECM Libra head of research Bernard Ching said on an annualised basis, the first quarter results came in within market expectations but below the research house’s full year estimates as it expected subsequent quarters to report strong numbers.

He said this was backed by the unrecognised revenue of RM863.8mil as at Sept 30 and including the strong sales from its maiden project in Canada, Quintet, the unrecognised revenue would swell to RM1.22bil as at Oct 31.

“The net interim dividend of 20 sen came as a surprise but we believe this is non-recurring. Nonetheless, we believe the company may reinstate its previous dividend payout guidance of 35% which has been scrapped over the last three financial years in order to conserve cash amid the uncertain economic outlook then.

“As the net debt/equity ratio of the company has been reduced from 0.52 times in FY08 to 0.34 times in FY10, we expect the company to have greater financial capability to reward its shareholders going forward,” Ching said.

Another local analyst said Sunrise’s results were OK and there was no major surprise. However, he concurred with Ching that Sunrise’s project in Canada did exceptionally well and almost fully taken up.

“The dividend was indeed a surprise. We were only expecting FY11 dividiend to be 5.5 sen,” he said.

By The Star

ECM keeps 'buy' call on Sunrise

ECM Libra Investment Research has maintained its "buy" call on Sunrise Bhd with the target price unchanged at RM3.58.

In a research note today, it said the target price was unchanged, pending the widely expected announcement of a corporate exercise today involving UEM Land Holdings Bhd.

ECM Libra reduced its numbers for the financial year 2011 to 2013 taking into account, retention of some units from future launches, for the operation of serviced apartments.

"But this will be offset by recognition of Quintet - residential project in Richmond, Canada - earnings on percentage completion basis at group level instead of at unit level.

"Despite our above consensus numbers, we still expect Sunrise to post record earnings in financial year 2011, backed by strong sales and unrecognised revenue," ECM Libra said.

Sunrise launched the phase one of Quintet with a gross development value (GDV) of RM374 million on Sept 28 and the project is sold-out as of to date.

Phase two with a GDV of RM825 million will be launched in the first quarter next year.

Meanwhile, Menara Solaris with a GDV of RM480 million is expected to be launched within the next three weeks.

During the first quarter financial year 2011, property sales of about RM100 million was achieved, but this does not include RM351 million sales from Quintet achieved in Oct 2010.

Unrecognised revenue remains flattish quarter-on-quarter at RM864 million but would swell to RM1.2 billion in Oct 2010, ECM Libra said.

OSK Research, meanwhile, said it is maintaining a "buy" call on Sunrise but downgraded the target price to RM4.33 from RM4.62 previously.

This was due to the unexpected interim dividend surprise of 26.67 sen as well as some changes to its forecast assumptions on the Quintet.

OSK Research is upgrading Sunrise's financial year 2011 and 2012 earnings upwards by 5.6 per cent and 12.1 per cent respectively.
The management has been guided that earnings from the Quintet, including phase two, would be recognised on a progress billing basis.

Although Sunrise's first quarter financial year 2011 turnover fell by 10 per cent year-on-year, net profit dipped by a mere two per cent as progress billings from its recently launched high-margin projects, such as 11 Mont Kiara and 28 Mont Kiara, picked up momentum.

On the other hand, quarter-on-quarter turnover surged 32 per cent but net profit dropped five per cent on higher expenses incurred on commencement of its Canadian project.

Sunrise's latest unbilled sales totaled RM1.22 billion amounting to 2.1 times of financial year 2010 total turnover.

By Bernama

New rule to cool property speculation

Bank Negara Malaysia has put in place a rule that allows banks to lend only up to 70 per cent of the house value.

The new mortgage lending rule, which applies only to borrowers taking up a third housing loan, is meant to curb excessive investment and speculative activity in urban areas.

"While Malaysia is not experiencing a general property price bubble, targeted pre-emptive measures are appropriate to moderate the increases in property prices that are evident in select locations, arising from purchases that are speculative in nature.

"This measure is expected to moderate excessive investment and speculative activity in the residential property market and to ensure affordability of homes for genuine house buyers," Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said in her keynote address at the Financial Industry Conference in Kuala Lumpur yesterday.

She gave the assurance that financing facilities for the purchase of first and second homes would not be affected and that borrowers would still be able to obtain financing for these at the current loan-to-value ratio (LVR) applied by individual banks, based on their internal credit policies.

The new rule takes effect immediately. Banks were previously not subjected to any curbs on mortgage lending.

The Association of Banks in Malaysia (ABM), whose members comprise the country's 23 commercial banks, supported Bank Negara's move, saying that it was "timely and pre-emptive".

"While the banking sector is wholly in support of house ownership, we agree that appropriate measures should be adopted to avert unhealthy speculative activities which could lead to a property bubble," its chairman Datuk Seri Abdul Wahid Omar said in a statement yesterday.

Abdul Wahid, who is also the chief executive officer of top lender Malayan Banking Bhd (Maybank), said the move was not expected to dampen or have an adverse impact on the growth of residential property development, nor on the banks' house financing business.

The ABM and its member banks had engaged with Bank Negara on the matter prior to the latter coming out with the ruling.

A banking analyst from a foreign brokerage noted that most banks, particularly the bigger ones, already adopt strict LVR on borrowers taking up a second, and especially third, housing loan, with location also being an important factor.

As such, the analyst agreed with Abdul Wahid that the new rule was not likely to have a big impact on the banks' mortgage business.

"On a third loan, it's already quite hard to get an 80 per cent LVR now," she remarked. For a first loan, banks usually lend up to 90 per cent of the house value, or even up to 100 per cent in some cases.

The country's biggest mortgage players by market share are Public Bank Bhd, CIMB Bank Bhd and Maybank.

Property developer Mah Sing Group Bhd also does not see the new rule hurting overall sentiment of the market significantly as it comprises mainly first-time buyers and upgraders.

Neither does its group managing director Tan Sri Leong Hoy Kum see a property bubble building up as the price increases have been largely those of properties with good concepts by well-known developers and in good locations.

Zeti, in her speech, noted that residential property prices in the country had increased steadily in tandem with economic development and rising household income.

"In the more recent period, however, certain specific locations, particularly in the urban centres, have experienced faster growth, both in house prices and the number of transactions. Supporting this trend has been the increase in financing for multiple-unit purchases by a single borrower. This suggests investment activity that is of a speculative nature," she said.

Property prices in Malaysia rose 5.6 per cent in the first quarter of this year and 4.2 per cent in the second quarter, according to Bank Negara.

By Business Times

New mortgage rule 'positive' move: Citi

Malaysia’s move to tighten mortgage rules is “positive” for the nation’s banks as it will help prevent a property bubble and limit the risk of household non-performing loans, Citigroup Inc analyst Fiona Leong said in a report yesterday.

The central bank yesterday placed a limit on the loan-to-value ratio for people taking out third mortgages to buy homes in a bid to moderate “excessive” investment and speculation in urban areas.

Banks with bigger exposure to home mortgages are Hong Leong Bank Bhd and Alliance Financial Group Bhd, Leong said.

By Bloomberg

Support for Bank Negara’s housing LVR cap move

PETALING JAYA: Bank Negara’s imposition of a maximum loan-to-value ratio (LVR) of 70% for a third and subsequent housing financing facility taken by a borrower is seen as a timely pre-emptive measure to avert unhealthy speculative activities and a potential property bubble, industry players concurred.

With the latest measure that takes immediate effect, people buying their third and subsequent house would be required to pay a higher down-payment than the current standard minimum of 10% of the value of a house.

In a statement yesterday, the central bank said financing facilities for purchase of first and second homes would not be affected and borrowers would continue to be able to obtain financing for these purchases at the present prevailing LVR level applied by individual banks based on their internal credit policies.

Real Estate and Housing Developers Association president Datuk Michael Yam said the association supported the measure as it would ensure a healthier and orderly housing market.

“There are some hot spots in the housing market where prices have appreciated higher than the average price increases in other locations. As financing for the first and second housing properties will not be affected by the ruling, the move is not expected to dampen the performance and growth of the housing property sector.

“Meanwhile. the LVR cap on those buying their third and subsequent house should stem speculative buying and ensure a more sustainable housing market,” Yam added.

Mah Sing Group Bhd group managing director cum group chief executive Tan Sri Leong Hoy Kum said the move was not surprising as Bank Negara had given earlier indications of such a move.

“The move should not significantly affect the overall sentiments of the market which comprises mainly first-time buyers and upgraders.”

Leong said there was no property bubble as price increases were only for properties with good concepts in good locations.

“As long as developers offer quality properties with good concepts in prime locations, there should still be takers due to our strong employment market, low interest environment and good liquidity in our financial system,” he added.

National House Buyers Association honorary secretary-general Chang Kim Loong said the measure would help curb speculative buying in the local housing market.

“Prices of landed residential properties have increased substantially over the last five years.

“We are glad that the Government has heeded HBA’s call with regards to the LVR. We will next seek to make housing more affordable for middle-income households and have pricing control for this group of buyers.

“HBA has urged the Government to set up a Special Task Force with such an objective and aspiration,” he said.

RAM Ratings head of financial institution ratings Promod Dass said: “Given this LTV measure only applies to the third home loan onwards, there should still be ample opportunities for banks to focus on first-time home buyers and perhaps to finance the purchase of a second home for lifestyle upgrading purposes.”

“All said, the level of prevailing interest rates would be an important factor too for the health of home loans, given that the bulk of outstanding home loans are based on floating interest rates,” he said in an e-mail interview.

The Association of Banks in Malaysia (ABM) chairman Datuk Seri Abdul Wahid Omar said while the banking sector supported house ownership, ABM agreed that appropriate measures should be adopted to avert unhealthy speculative activities which could lead to a property bubble.

Abdul Wahid, who is also Malayan Banking Bhd president and CEO, said: “In my view, the application of the measure is clear and specific and the LTV ratio itself, optimal.

Given that financing for first and second housing properties will not be affected by the ruling, the move is not expected to dampen or have an adverse impact on the growth of residential property development sector as well as the banks’ house financing business.

“Affordability of homes for genuine buyers will be preserved as banks continue to lend prudently under their respective risk management framework.”

On the Financial Capability Programme, he said it underscored the view shared by ABM that education was paramount in the promotion of sound financial and debt management.

Details of the implementation of the programme would be announced next month.

By The Star

JP Morgan: Buying opportunity in property share price weakness

KUALA LUMPUR: JP Morgan Asia Pacific Equity Research said any weakness in share prices from the Bank Negara Malaysia announcement on the imposition of a 70% loan-to-value cap (LVR) on mortgages for third properties as “a buying opportunity”.

In a research note issued on Thursday, Nov 4 it said the new ruling was clearly targeted at speculative buyers. Genuine first and even second time home buyers would not be affected, and would still be able to obtain financing of up to 90%.

“This is in line with guidance and not a surprise to the market. The government has already provided hints on this possibility over the past couple of months. Note however that even prior to this, banks have generally been stringent with the previous 90% ceiling LVR already not a common practice as much depends on the credit profile of each customer,” it said.

JP Morgan said on balance, it remains positive. In the short term, developers with higher exposure to the more speculative condo/high rise market (namely in the KLCC and Mont Kiara area, Klang Valley) and even for high-end landed properties in certain limited hot spot locations in Klang Valley (i.e. Desa Park City, Mutiara Damansara) and in Penang, could see some softening in demand.

“Overall however, we believe the move is positive for the long term sustainability and health of the sector,” it said.

It maintained its overweight on IJM Land and SP Setia, but preferred the former on valuation. The more speculative condominium market accounts for no more than 20% of sales for SP Setia and 35%-40% for IJM Land.

“For IJM Land, its strong branding, attractive product portfolio at the 'Light' project, and shortage of land in Penang island, also means that it should continue to fare better than most other condo developers, in our view,” it said.

JP Morgan said both companies could also benefit from upside to earnings from new projects i.e. from the commercial KL Eco City project for SP Setia to be launched by year-end, and from the Canal City residential project for IJM Land to be likely launched in 2011.

“We see any weakness in share prices from this announcement as a buying opportunity,” it said.

It said IJM Land was currently trading at a 30% discount to its RNAV of RM3.80/share, while SP Setia is already trading close to its RNAV of RM5.20/share.

During periods of strong liquidity and foreign inflows back in 2007 coupled with healthy sector fundamentals, SP Setia traded up to a 20% premium to RNAV.

By The EDGE Malaysia

Mah Sing buys land worth RM167m

PROPERTY group Mah Sing Group Bhd is buying two pieces of land in Ampang and Cyberjaya for a combined RM167 million and plans to build properties with a total gross development value (GDV) of RM1.2 billion.

The 1.9-hectare freehold land along Jalan Ampang, Kuala Lumpur, is being bought for RM114.9 million or about RM560.63 per sq ft. The development, which will be known as M City, is about 1.26km from the group's recently launched serviced residence project, M Suites.

M City will be a niche project comprising serviced residences, SoHo (small office, home office) and retail outlets with an estimated GDV of RM920 million to be developed over five years.

Preliminary plans for M City include flexible-sized serviced residences and SoHo with built-ups from about 500 sq ft with indicative pricing from RM398,800 a unit.
"We are toying with the idea of vertical green lungs in M City. It will be a new concept for the area," group managing director and group chief executive Tan Sri Leong Hoy Kum said in a statement.

The group is also buying 14.11ha land adjacent to its Garden Residence township in Cyberjaya for RM51.6 million.

It intends to develop two- and three-storey semi-detached homes with a built-up area of about 3,076 sq ft. Indicative pricing is around RM1.28 million for the two-storey semi-detached unit and RM1.44 million for the three-storey semi-detached unit.

To date, Mah Sing has acquired new projects with a combined gross development value of RM3.1 billion.

The group has projects with remaining GDV and unbilled sales of about RM8.64 billion.

Mah Sing's land are in the Klang Valley, Kuala Lumpur, Penang and Johor Baru. They should last the group between five and seven years.

By Business Times