Faber to launch RM600m Klang Valley, Sabah projects

FABER Group Bhd plans to launch new property projects worth some RM600 million in the Klang Valley and Sabah over the next 18 months.

Its property arm, Faber Development Holdings Sdn Bhd (FDH), has 18ha, which is enough to launch five niche projects and keep it busy for four years, managing director Adnan Mohammad told reporters at a briefing in Kuala Lumpur yesterday.

"We are not holding back on development. We have to keep moving under current market turbulence," Adnan said.

Adnan said Faber is focusing on niche projects as it is easier to adjust prices for raw material costs and such developments offer higher margins.

In Kota Kinabalu, Sabah, FDH will launch Taman Hilltop Perdana in early August, a two-year project worth RM32 million, comprising 34 units of triple-storey semi-detached homes.

FDH senior general manager Khalid Abdul Majid said it is targeting medium to high income groups. The units will be priced at RM870,000 to RM1.1 million each.

Also in Kota Kinabalu, FDH will launch phase 2 of Lucky Heights, a RM110 million high-end condominium project with 300 units, each priced from RM300,000, by the second half of 2009.

Phase 1 was completed 20 years ago.

FDH, in a venture with City Hall, is also launching 40 units of semi-detached homes and six bungalows at Taman Danau Desa. The semi-detached units will be priced at RM1.9 million each while the bungalows start from RM2.5 million.

The RM90 million project, which is part of its multi-billion ringgit Taman Desa at Old Klang Road, Kuala Lumpur, will be launched in early 2009. Faber started developing Taman Desa in the mid-1970s.

The homes will be built on 2.3ha with leasehold title owned by City Hall, which will get 20 per cent of the project's profit, Khalid said.

"Whether good times or bad, we are confident of the sale of the product due to its locality," he said.

Also at Taman Danau Desa, FDH will launch 38 units of three-storey superlink homes, worth RM60 million by the third quarter of 2009.

At FDH's existing development, the RM600 million Laman Rimbunan mixed development project in Kepong, it will launch phase four and five comprising 160 units of semi-detached units and three bungalows by year-end.

"We plan to sell the semi-d homes for between RM1.1 million and RM1.3 million each while the bungalows will double that. We are targeting buyers from Sg Buloh, Kepong, Rawang and Selayang. We are bullish on the product because of the take up rate at our previous phases," Khalid said.

The 40ha project, in which FDH has a 55 per cent stake and the rest held by Metro Kajang Bhd, has six phases and the first three phases, worth RM300 million, have been launched since end 2004.

By New Straits Times (by Sharen Kaur)

Kuok family-controlled firms to spend US$1b on China site

KERRY Properties Ltd and three partners, all controlled by the family of Malaysian tycoon Robert Kuok, will invest as much as 7.3 billion yuan (US$1.07 billion) in a real estate project in China’s Hebei province.

Kerry Properties and Shangri-La Asia Ltd, both listed in Hong Kong, Singapore-listed Allgreen Properties Ltd and Malaysia-based Kuok Brothers Sdn Bhd have won a tender for the building site in Tangshan city, according to a statement to Hong Kong's stock exchange yesterday.

Kerry Properties will own 40 per cent of the project while Allgreen will take 25 per cent, the statement said. Shangri-La and the Kuok Brothers will own 20 and 15 per cent, respectively.

The companies have agreed to pay 1.71 billion yuan for the site, which will be used to develop residential buildings and hotels, the statement said.

By Bloomberg

Gamuda, IJM ideal targets for Mideast firms: Macquarie

GAMUDA Bhd and IJM Corp, Malaysia's second- and third-biggest builders, may be perfect takeover targets for Middle East companies seeking expertise for Gulf development projects, Macquarie Research said.

The shares of the two companies are cheaper than regional counterparts, and most of their stocks are owned by shareholders without significant stakes, making an acquisition easier, Sunaina Dhanuka, a Kuala Lumpur-based analyst at Macquarie, wrote in a report yesterday.

"Companies like Gamuda and IJM could be ideal targets," said Dhanuka, who has an "outperform" rating on both stocks. "Few Middle Eastern companies have the skills required to undertake large infrastructure projects. Gamuda's skills are likely to be the most sought after."

Persian Gulf investors are spending US$2.4 trillion (US$1 = RM3.24) on local construction projects, according to Dubai-based research company Proleads. Shares of Gamuda and IJM, which have built tunnels, roads and railways across Asia, have tumbled this year on concern growth is slowing at home, and Malaysia's Edge newspaper on July 20 reported a possible bid for Gamuda by a Middle East fund.



Gamuda shares, down 44 per cent this year, rose 10 sen to RM2.69 yesterday, giving the company a market value of RM5.4 billion. IJM fell 15 sen to RM5, extending this year's drop to 42 per cent and cutting its market value to RM4.3 billion.

Gamuda's largest shareholder, the Malaysian royal family in the state of Perak, supports the takeover plans by a Middle East fund, according to a newspaper report, which didn't name the possible buyer. The acquisition of the royal family's 7.5 per cent stake is crucial to any takeover, the report said.

By Bloomberg

Asiatic upbeat on luxury homes

KULAI: Asiatic Land Development Sdn Bhd sees demand for high-end houses in the Senai-Kulai growth corridor is expected to rise in the coming years.

Alex Phang (left ) and Asiatic vice-president Habibullah Kong after the launch

Executive vice president Alex Phang said developers with projects in the corridor should take the opportunity and cater to such demand.

Among the new developments coming up in the area are the Airport City, MSC Cyberport City, Senai Multimodal Terminal Hub and Skudai Knowledge Centre.

“This augurs well for the company as our on-going Asiatic Indahpura Kulaijaya township is strategically located in the growth corridor,” he said at the launch of 82 semi-detached houses at the Lakeview Residency Precinct 33A by Kulai MP Datuk Seri Ong Ka Ting on Sunday.

The township covers 2,832.8ha and, to date, 404.87ha have been developed.

The 20 single-storey semi-detached houses are priced from RM318,800 each and the double-storey semi-detached houses from RM470,822.

Phang said the company expected to generate RM40mil in gross development value from the houses, which would be completed in 2010.

The Senai-Kulai corridor is part of Iskandar Malaysia which focuses on the manufacturing sector and related activities like electronics and electrical, high-value food processing and agro-based processing, bio-tech, aviation-related downstream industries and engineering based industries.

Demand for houses would come from executives, senior management staff, local and foreign investors working or having investment interest in the Senai-Kulai area, Phang said, adding: “We are also looking at upgraders from Johor Baru district, Malaysian professionals working in Singapore and Singaporeans.”

Pricing would be the main factor attracting buyers from Johor Baru and Singapore, he said, as a similar house would cost double in Johor Baru and even more in the republic.

Asiatic Land is a wholly owned subsidiary of Asiatic Development Bhd and a member of the Genting group.

By The Star (by Zazali Musa)

Developer counts on Johor land for growth

JOHOR BARU: Tebrau Teguh Bhd says its land bank within the Tebrau-Plentong river basin development augurs well for its future growth.

Executive vice-chairman Johar Salim Yahaya said the company had a total 437.47ha and 12km water frontage.

Johar Salim Yahaya (left) and Mohd Zafaruddin Razali with a model of the shop offices at Puteri Point Commercial Park in Permas Jaya

He said 56.06ha were currently being developed with low and high-density apartment blocks, shop offices and a commercial complex.

“Our land bank is strategically located in the main growth nodes of Iskandar Malaysia,” Johar told StarBiz recently at the launch of shop offices at its Puteri Point Commercial Park at Permas Jaya near here.

Johar said the 62 three-storey shop offices were priced from RM456,000 and expected to be completed in 2010 with gross development value of RM37mil.

He said the company was currently talking to a supermarket operator to set up a standalone supermarket in the 4.856ha commercial park.

Head of property division Mohd Zafaruddin Razali said growth prospects for the supermarket was promising as there was an estimated population of 80,000 within a 1km radius.

He said Tebrau Teguh planned next to develop 184.69ha with a 1.5km river frontage just a stone’s throw from the commercial park.

“This is the last piece of land for development in the eastern part of Johor Baru with river frontage,” he said.

By The Star - StarBiz - (by Zazali Musa)

ASM Invt in talks on REIT with developers

ASM Investment Services Bhd, the asset management arm of Amanah Saham Mara Bhd, is in talks with two property developers on setting up a real estate investment trust (REIT).

The company may manage the property trust, which is expected to be launched by the second quarter of next year.

This is part of its plans to double the size of funds under its management to RM1 billion in two years from about RM500 million at present.

ASM Investment is also in the midst of tying up with a foreign party to offer exchange-traded funds (ETFs) by the third quarter of next year.

Chief executive officer Nik Mohamed Zaki Nik Yusoff said he hopes corporate product activities will command half of ASM Investment's fund size by 2010.


NIK MOHAMED: Firm hopes to attract larger investment with more corporate products

Currently, retail products make up 80 per cent of its fund size, while corporate products make up the rest.

"By having more corporate products, we will be able to attract larger investment, (hence) the reason we are interested to offer a REIT and ETF next year," he said in Kuala Lumpur.

Yesterday, ASM Investment launched its 17th investment fund called the ASM Syariah Dividend Fund which has a fund size of 500 million 25-sen units. A minimum of RM100 is required for the investment in the fund.

Despite the weak market, Nik Mohamed is optimistic that the fund will be fully taken up within six months.

"Yes, people are conservative to invest due to the uncertainty in the market today. But investors realise that this is in fact a good time to invest based on the low price offerings in the stock market," he said.

Furthermore, he added that a dividend fund is suitable for conservative investors like pensioners since it is low-risk and provides a consistent stream of returns.

A wholly-owned subsidiary of Amanah Saham Mara Bhd, ASM Investment also has the licence to promote and distribute third-party funds.

By New Straits Times (by Zurinna Raja Adam)

REITs an alternative to other stocks

PETALING JAYA: As large numbers of investors exit from stocks and shares of companies, high yielding real estate investment trusts (REITs) are a viable alternative.

Although REITs are equities in the sense that they are also entities listed on Bursa Malaysia, “downside is limited for these assets,” said an investment officer at Meridian Asset Management Sdn Bhd.

There are very few alternative asset classes in this country in which savers would be willing to place a large part of their savings. Generally, for the average saver, the few choices are shares, property or cash.

The edge that REITs have over real property is that in the former, investors would be buying them below their net asset values (NAV) whereas buyers would have to pay market prices for real property.

The NAV of Quill Capita Trust, for instance, was reported as RM1.20 per unit earlier this month. The REIT closed at RM1 yesterday.

In addition to this discount to its NAV, Quill Capital offers a yield of about 8.5% after its price has almost halved from a high of RM1.90 last year.

While there were concerns that property prices could decline as economic growth slows in the second half of the year, the discount in Quill Capita's NAV was defensive while replacement cost for its properties had increased, the Meridian officer said.

As a result of the much higher costs of cement, steel and other building materials, the construction cost of commercial properties has sharply increased. Quill Capita owns a range of commercial properties that comprise office, retail and technology park buildings.

The current barriers to growth would be, ironically, its high yield of 8.5%, which means it's difficult to identify and purchase properties that have a higher yield than the REIT. It would be difficult to find properties that are yield accretive for the trust.

High interest rates would also erode its ability to expand with borrowed funds.

It is partly for this reason that REITs in Singapore have also fallen in price where they are yielding about 7% against a lower benchmark yield in government securities.

Expansion by REITs may have to wait until their prices move back up.

“It would have to be money that can be kept in a REIT for a two-year time frame,” the officer said, adding that during that time, the investor would receive a good yield.

By The Star

Bank Simpanan banks on personal, housing loans

BANK Simpanan Nasional (BSN) expects personal and housing loans to drive growth this year as it braces itself for a possible rise in bad loans.

Personal loans are due to rise 21 per cent to RM4.6 billion this year from RM3.8 billion last year, chairman Datuk Seri Abdul Azim Mohd Zabidi said in an interview recently.


"BSN is now a different 'animal' after a transformation exercise." Datuk Seri Abdul Azim Mohd Zabidi Chairman Bank Simpanan Nasional

The bank is on track to achieving its target as it has given out some RM4.4 billion in personal loans as at end-June this year.

Housing loans, which form the bulk of its loan portfolio, are due to expand by another RM400 million or 15 per cent to a cumulative RM3.1 billion by year-end.

Mortgages totalled RM2.7 billion as at June 30 2008, which accounts for 37 per cent of its total.

Its customers are set to continue their preference for Islamic loans. Its Islamic assets make up 43 per cent of its loan book of RM3.2 billion at the end of June this year.

"Islamic banking has become more popular in the current situation because people think as the interest rates go up they prefer to lock in, according to the Islamic banking rates," Azim said.

The national savings bank is a statutory body, which means that its products are limited. It is not able to extend trade lines, corporate loans or overdrafts.

It has also started to give out car loans again to civil servants, mostly teachers, after terminating the service about five years ago due to "huge problems".

Azim said BSN is now a different "animal" after its transformation exercise, which has helped improve operations, service and products.

Apart from being equipped with mobile banking and weekend banking facilities, going electronic has also helped the bank to improve its efficiency and traceability of loans.

The bank's gross non-performing loans level is at nine per cent compared with six per cent for the industry. Azim expects BSN to face rising numbers although the bank's current level is still within reach of the industry average.

Malaysians are facing higher food prices as well as a higher petrol price after a 41 per cent hike in June. But BSN is ready to help customers.

"For instance, we may have to step up the repayment scheme in the case of housing loans, to reduce the monthly repayment amounts by half," Abdul Azim said.

The bank has a special monitoring unit for NPLs and delinquent accounts.

"Our advice to borrowers is once your disposable income has shrunk, you need to come back to the bank and we can help to restructure your loan, by increasing the tenure of the loan until good times come round again. Don't wait till the loan becomes a NPL which makes it difficult to justify helping you, as we have to adhere to Bank Negara's strict guidelines."

Microfinancing is still very much in the books, said Abdul Azim and a scheme was introduced last year.

"About RM800 million was disbursed under the first microcredit scheme was introduced, NPLs was high but we slowly brought them down and managed to grow our assets from housing which helped to cushion the NPLs."

Although it was one of the three financial institutions identified under the previous budget for the distribution of microfinance apart from Bank Rakyat and Agro Bank, BSN's market share is small as it prefers a prudent and more conservative approach.

As at June 30, it disbursed RM21.3 million of which 69 per cent was for the retail sector, followed by services at 23 per cent and manufacturing eight per cent.

Under the government's Amal Jariah project to rebuild houses for the hardcore poor, BSN, one of the two financial institutions tasked with the project, has disbursed RM8.8 million out of RM25 million.

Some 1,283 houses have been completed with work in progress on 423 houses.

By New Straits Times (by Rupa Damodaran)

Gamuda, IJM may be 'ideal' takeover targets: Macquarie

GAMUDA Bhd and IJM Corp, Malaysia’s second- and third-biggest builders, may be perfect takeover targets for Middle East companies seeking expertise for Gulf development projects, Macquarie Research said.

The shares of the two companies are cheaper than regional counterparts, and most of their stock is owned by shareholders without significant stakes, making an acquisition easier, Sunaina Dhanuka, a Kuala Lumpur-based analyst at Macquarie, wrote in a report dated yesterday.

“Companies like Gamuda and IJM could be ideal targets,” said Dhanuka, who has an “outperform” rating on both stocks. “Few Middle Eastern companies have the skills required to undertake large infrastructure projects. Gamuda’s skills are likely to be the most sought after.”

Persian Gulf investors are spending US$2.4 trillion on local construction projects, according to Dubai-based research company Proleads. Shares of Gamuda and IJM, which have built tunnels, roads and railways across Asia, have tumbled this year on concern growth is slowing at home, and a newspaper on July 20 reported a possible bid for Gamuda by a Middle East fund.

Shares of Gamuda, down 44 per cent this year, today rose 3.5 per cent to RM2.68 at 10.24 am in Kuala Lumpur, giving the company a market value of RM5.4 billion. IJM fell 2.9 per cent to RM5, extending this year’s drop to 42 per cent and cutting its market value to RM4.3 billion.

Gamuda’s largest shareholder, the Malaysian royal family in the state of Perak, supports the takeover plans by a Middle East fund, according to the paper, which didn’t name the possible buyer. The acquisition of the royal family’s 7.5 per cent stake is crucial to any takeover, the newspaper said.

Gamuda stock is trading at 18 times earnings, compared with an average of 22 among 20 heavy construction companies in Asia, according to data compiled by Bloomberg. IJM is trading at 11 times estimated earnings.

By Bloomberg

MRCB to buy land in Penang

MALAYSIAN Resources Corporation Bhd (MRCB) plans to acquire a freehold land in Penang for RM26 million.

MRCB entered into a sales and purchase agreement with MBSB Development yesterday to purchase the beach-front land measuring 13,533 sq metres.

The land, located near Bayview Hotel and opposite to Ferringhi Villa, will be used by MRCB to develop high-end apartments.

By New Straits Times

Amanah Raya Real Estate Investment Trust to expand portfolio to RM1b

The manager of the AmanahRaya Real Estate Investment Trust (AR-REIT) plans to inject three properties valued at about RM300 million into the REIT before the year-end, an official said.

This will take the total asset value of Malaysia's second largest REIT to about RM1 billion from RM645 million currently.

"It's going to be three properties in one injection," said Datuk Mohamed Azahari Mohamed Kamil, a director in AmanahRaya-JMF Asset Management Sdn Bhd, the manager.

"This is going to be a commercial building-office space as well as two industrial buildings. One is in the Klang Valley while the other two are outside, but in very good locations," he said, when met by Business Times recently.

One of the buildings is already owned by AmanahRaya-JMF's parent company, Amanah Raya Bhd (ARB), while the other two will be new acquisitions, he said, declining to elaborate.

He is targeting to obtain all relevant approvals from the Securities Commission later this year and have the additional units listed before December 25.

On another matter, Azahari said plans to list a REIT in Singapore with an Indonesian partner have been postponed because of soft market conditions there.

The REIT, equally owned by ARB and Indonesian property firm Gapura Prima group, was to have been listed in Singapore by March 2008.

"We had got all those plans ready but unfortunately the market is very soft in Singapore, particularly for REITs, so we decided to put it on hold for the time being. We will find an opportune time to have it listed," he remarked.

Azahari said the REIT market at home too is soft at present but believes that players should create more value by doing asset injections.

AmanahRaya-JMF has been active at this, having injected five additional assets and nearly doubling AR-REIT's asset value in less than a year after its listing in early 2007. It comprises 13 assets now.

Azahari aims for the REIT's size to touch the RM2 billion mark by the end of 2010.

"We are looking at potential buildings to be injected as an ongoing yield-accretive type of strategy," he said.

ARB is currently in talks to buy the Kenanga International building in Jalan Sultan Ismail from Injaz AsiaEquity Property Bhd, which may be injected into the REIT in a later year.

Azahari, who hopes to finalise the purchase by the year-end, said the market value of buildings in that area is about RM600 to RM900 per sq ft (psf).

Injaz had bought the 22-storey office building last June for just RM165 million cash, or RM555 psf.

Azahari continues to be positive on the property market's prospects, especially on assets in prime locations.

"We believe that Malaysia has a lot more value that can be reaped. If you look at properties now, even within the KLCC, they are all undervalued ... so there's a lot of opportunity for growth," he said.

He said AR-REIT, which reported a first quarter net profit of RM7.6 million this year compared with RM1.2 million in the same period last year, would focus only on local assets for now.

By New Straits Times (By Adeline Paul Raja)

Malaysia Property Inc to kick off in October

The soon to be launched Malaysia Property Incorporated (MPI), a joint public-private sector initiative to promote Malaysia's real estate internationally, will see the country getting into the limelight as a global property haven.

Promotional programmes that include road shows and conferences in the target markets of Britain, Japan and the Middle East have been drawn up and should take off later this year.

The Government has recently given the go-ahead for FIABCI Malaysia and Real Estate and Housing Developers Association (Rehda) to promote the country's real estate to foreign investors under the MPI umbrella.

Scheduled to kick off by October, the MPI will start off with a grant of RM25mil provided by the Economic Planning Unit (EPU).

Dr Richard Fong

FIABCI Malaysia president Datuk Richard Fong said the initiative, which was initially targeted for launch earlier, was delayed because of unforeseen circumstances.

“We are excited that everything is falling into place now and the MPI will be championing the country's real estate industry in the international arena,” Fong told StarBiz.

He added that Malaysia was still relatively unknown as a destination for international real estate investors.

Compared with other cities around the region such as Singapore, Bangkok, Phuket and Bali, Kuala Lumpur is getting just a tiny fraction of the investment in the region. This is despite the fact that Malaysia has the most attractive laws favouring foreign investment in real estate.

“The majority of the land is freehold and foreigners can buy any amount of residential properties priced above RM250,000. Our land laws are clear and transparent; there is also a waiver on real property gains tax.

“The Malaysia My Second Home (MM2H) programme is also not well known overseas. Most of the investors we met overseas are not aware of the benefits offered under this programme.

“MPI's objectives are aimed at creating awareness among the foreign investment community on the attractive conditions regarding investment in Malaysia's real estate,” Fong said.

Datuk FD Iskandar

According to Rehda vice-president Datuk FD Iskandar, the nine-member board on MPI comprising industry representatives is still working out the right package of incentives for developers to take part in the MPI initiatives.

“We are brain-storming and working out the key performance indicators (KPIs) to rate the effectiveness of the MPI programmes. The objective is for Malaysia to re-brand itself as an international real estate destination, be more transparent and attract more foreign investments,” Iskandar said.

Road shows and promotional activities in the target markets will bring together developers to showcase their property projects, especially high-end residences in the Kuala Lumpur City Centre (KLCC) enclave as well as offices and other commercial properties in the Klang Valley.

According to Iskandar, there has not been any long-term and effective initiatives in the past to promote and brand Malaysia as a major real estate investment destination, which explained why the foreign exposure in local property was still very low.

“Currently, Malaysia is being promoted on a piecemeal basis and the time is right for a well coordinated initiative such as the MPI to place Malaysia on the world map of investors,” Iskandar said.

Besides attracting high net worth investors for the MM2H programme, Iskandar said the MPI also wanted to attract foreign banks' data processing centres and back offices to set up their regional offices in Malaysia.

He said Malaysia was still a politically stable country and the current political developments showed that democracy was still very much alive in the country. Its other assets include a developed infrastructure system and a big pool of educated and skilled workers.

Rehda president Ng Seing Liong said if the objectives and direction for the MPI were on track, “this is definitely the right time for MPI to make a marked contribution to the local property industry.”

“Malaysia has quality projects that still lacked exposure in the international arena and there are many ongoing and planned developments that will be suitable for high net worth foreigners from other countries.

“The greater foreign interest will further add value and depth to our property market. KLCC residences, which are now fetching around RM2,000 per sq ft, are expected to move up to RM3,000 per sq ft with a few upcoming launches,” Ng said.

Yeoh Teng Tatt

Meanwhile, Malton Bhd chief operating officer Yeoh Teng Tatt said to promote stronger foreign participation, the Government should adopt a more open policy for foreigners and relax restrictions on foreign ownership of properties.

“Quality high-end properties in Malaysia are still considerably more affordable compared with most other countries and the MPI initiatives will augur well for local real estate to get into the radar screen of foreign investors,” Yeoh said.

By The Star - StarBiz - (by Angie Ng)

Kuwaiti company 4th largest investor in AR-REIT

KUWAIT'S Global Investment House (GIH) has emerged as an investor in AmanahRaya Real Estate Investment Trust (AR-REIT), Malaysia's second largest property trust by asset value.

GIH, an investment company, bought a 3.94 per cent stake, or 17 million units, at the end of June, making it the fourth largest unitholder. It bought the units from Kumpulan Wang Bersama, the property trust's sponsor and biggest unitholder.

"It acquired the units because of the stability of AR-REIT in terms of rental yield and unit price. GIH has started to enter Southeast Asia in various investments and they view REIT as a good investment to start with.

"We believe this is considered one of the largest of REIT units taken by Middle Eastern institution in Malaysia," said Datuk Mohamed Azahari Mohamed Kamil, a director in AmanahRaya-JMF Asset Management Sdn Bhd, the REIT manager.

AR-REIT plans to pay a better yield of about 7.4 per cent this year compared with 6.9 per cent last year.

"We're looking at about 7.4 per cent net. There shouldn't be any problem because there hasn't been defaults in any of our rentals," Mohamed Azahari remarked.

It recently announced its first interim dividend of 3.57 sen for the first six months this year, which translates into an annualised yield of 7.5 per cent based on its last price of 95 sen a unit.

AR-REIT's unit price, which has lost four per cent of its value this year, has been trading at between 91.5 sen and 99 sen. Its latest net asset value is 97.4 sen.

By New Straits Times (by Adeline Paul Raj)

Lack of incentives hindering REIT growth

KUALA LUMPUR: Although most real estate investment trust (REIT) valuations are relatively cheap now, declining well below their current net asset value (NAV) per unit in tandem with the recent decline of the market, investors are still reluctant to invest in them due to the unattractive tax structure and incentives, analysts said.

Analysts said the lack of investor confidence in the REITS had to do more with the issue of withholding tax and lack of other incentives rather than the unattractive yields or asset quality.

At the moment, Malaysia has one of the most unfavourable tax regimes for REIT investment. A witholding tax of 28% is imposed on foreign investors, while individual distributions received by investors are taxed as high as 26%.

In comparison, Singapore’s REIT investors are exempted from withholding tax but foreign institutional investors and corporations are subjected to a 10% withholding tax. In Hong Kong, the withholding tax system no longer exists.



Based on selective counters, at the close of trading last Friday, Starhill REIT ended at 87 sen per unit (NAV: 97.2 sen), UOA at RM1.13 (NAV: RM1.39), Tower REIT at RM1.09 (NAV: RM1.45), Axis at RM1.64 (NAV: RM1.65), Quill Capita at RM1.04 (NAV: RM1.20) and Atrium REIT at 76 sen (NAV: 99 sen).

Atrium, StarHill and UOA are trading below their IPO prices. The annual yield of the six REITs averages 9.41%, representing a favourable and good return on investment (ROI), particularly amid the high inflation and slowing growth environment.

“Given the lack of new incentives and new regulations to spur the industry, we are unlikely to see any major upward movement in the unit prices of the REITs and their values will continue to be depressed in tandem with the current market condition,” an analyst said.

While REITs offered one of the highest ROI, analysts said it was not enough to lure investors to invest in small capitalised stocks.

“While the returns are basically good, if compared to the returns from the market, the current structure governing REIT investment has hardly changed since its inception in 2005 as the successor to the old property trust.

“The incentives, tax structure and rules have to be revised, hopefully in the coming budget, in order for the REIT industry in Malaysia to flourish,” an analyst said.

In terms of asset quality, the top picks among analysts are UOA REIT and Starhill REIT, while Axis REIT is the favourite in terms of management quality, as it has been one of the most aggressive in terms of acquisitions and property portfolio diversification.

UOA REIT, with properties predominantly consisting of offices and commercial buildings, provides a good benchmark in the recovery and demand of office space, especially in and around the Kuala Lumpur’s central business district (CBD).

Starhill REIT had on July 11 announced a revenue of RM108.23 million for the year ended June 30, 2008 (FYE08), an increase of 9.5% over RM98.84 million in FY07, while net income was up 11.8% to RM81.27 million from RM72.69 million.

Mayban Trustees Bhd, the trustee of Starhill REIT, undertook a revaluation exercise on Lot 10, Starhill Gallery and JW Marriot Hotel that would increase the valuation of the company’s prime properties by RM254.36 million. As at June 30, 2008, Starhill Gallery and Lot 10 had occupancy rates of 99% and 94%, respectively.

The analysts said the current depressed REIT prices did not reflect their relatively strong fundementals as an inflation-beating investment that could provide a consistent dividend stream due to the strong asset quality.

But for the sector to see some excitement among investors, there is no denying the fact that the local REIT industry needs a boost in having better incentives that are at least on par with regional peers.

By The EDGE Malaysia (by Tony C H Goh)

Timing important during economic uncertainty

While the emphasis of property projects has always been on location, timing has now become more important during this property slowdown amid the economic uncertainty, said Mutiara Goodyear Development Bhd chief executive officer Kee Cheng Teik.

He emphasised that there was no bubble in the property industry but the crucial question was which developers could survive the suppressed demand.

Cashflow management was crucial for the company and it would only implement projects it could undertake and manage well. Hence, its successful residential and commercial property projects.

“As a medium sized company, we have survived the ups and downs and the past two recessions. But things will improve and there will be opportunities,” Kee said.

Despite the temporary suppression in the purchases of housing units, Kee said there would always be pent-up demand for housing.

“People will still have to buy, and if they don’t buy this year, they will have to buy next year, or the year after. When the market improves, there will be an increase in demand for property,” he said.

Kee is positive about the property sector in Penang and the Klang Valley due to the growing population. In the pipeline is a commercial block in Sunway in Petaling Jaya, shophouses in Mutiara Gombak, a Kajang housing scheme and a joint venture on Penang island.

In Seberang Perai, Mutiara Goodyear will continue to expand its township project, which was started in 1996 covering 1,084 acres. The township is near the Second Penang Bridge.

The company is also involved in an exclusive property project near Taman Melawati in Kuala Lumpur. The Nadayu project would be on an 80-acre freehold land near the Taman Warisan heritage park.

“This is probably the last piece of land of this size which can be developed near the forest,” Kee said. As the site was on a slope, the company had pumped in about RM20mil on earthworks and infrastructure there, he added.

Kee said the first 60 acres will comprise 142 bungalows, priced from about RM4mil and it would be exclusive and guarded. The GDV would be RM500mil.

The second phase will have superlink houses, condominiums and a boutique commercial centre. The total GDV is about RM800mil and the time frame to develop it is three to five years.

By The Star (by Joseph Chin)

SP Setia remains optimistic, plans new launches

SP SETIA Bhd, Malaysia's most valuable property developer, will continue to launch new projects this year despite tougher business conditions.

It aims to launch two projects worth RM1.2 billion before its fiscal year ends on October 31 2008.

They are Setia Sky Residences, the group's maiden luxury condominium project at the intersection of Jalan Tun Razak and Jalan Raja Muda Abdul Aziz Shah, Kuala Lumpur, and the second wave of its Setia Walk integrated commercial and residential project in Pusat Bandar Puchong.

SP Setia will also launch new phases within existing townships by October, executive director and chief operating officer Datuk Voon Tin Yow said.


Voon: SP Setia is unfazed by the recent hike in fuel and raw material prices... In fact, it is optimistic of brisk sales during this trying time.

Voon told Business Times in Kuala Lumpur recently that SP Setia is unfazed by the recent increases in fuel and raw material prices. In fact, it is optimistic of brisk sales during the current trying times.

For Sky Residences, the group is projecting a gross development value of RM850 million, pegging each unit at an average RM850 per sq ft.

It is positioned as an "urban chic" development targeted at sophisticated urbanites aspiring to live and work close to the city.

"We will proceed with the project based on feedback from clients.

"So far, there has been no new launches in that area in this price range. So we are quite optimistic of the product," Voon said.

For Setia Walk, it will launch 800 units of service apartments worth RM280 million to RM300 million in four phases starting September.

"As far as market is concerned, there is opportunity to buy. If people wait and see, prices would rise further. What is possible is that property prices would not come down for new launches," Voon said.

"It won't be viable to maintain the selling price for new products because of fixed land and construction cost," he said.

Voon believes the current market scenario is short term and the situation will improve.

"If people hold back on buying, there will be less launches, which may lead to shortage of supply of new units," he added.

SP Setia has 1,937ha in Penang, Johor, Klang Valley and Kota Kinabalu, Sabah, with 16 ongoing projects worth RM30 billion. It is confident of meeting its RM1.5 billion sales target this year.

The company made a net profit of RM260 million on revenue of RM1.15 billion in 2007.

By New Straits Times - Business Times - (by Sharen Kaur)

I-Berhad in talks on en bloc sale of The Peak@KLCC

I-BERHAD, the developer of luxury serviced residence The Peak@KLCC, is in talks with several parties for a possible en bloc sale for this property.

The Peak, with an estimated gross development value of RM500 million, is expected to be officially launched by year-end.

The 41-storey property, located on a 0.43ha of land on Jalan Kia Peng, Kuala Lumpur, will have 104 units measuring between 3,000 sq ft and 5,000 sq ft each.

"There are potential en bloc buyers... we are talking to a few. The enquiries have come from Koreans and Middle Easterners," its deputy chief executive officer Lim Boon Siong said.

Lim hopes the property will fetch at least RM2,000 per sq ft based on recent property transactions in the area.

The land is owned by I-Bhd's majority shareholder Sumurwang Sdn Bhd which owns 58.59 per cent of I-Bhd. Sumurwang, controlled by I-Bhd chairman Datuk Lim Kim Hong, bought the land in 1993 for RM280 per sq ft.

I-Bhd will form a joint venture with Sumurwang to develop The Peak.

To be ready by end-2011, the project will be funded either through internal funds, cash raised from a rights issue or a combination of both.

"We are looking at the market condition now given the fuel price increase and the US recession that does not help the situation," Lim said, adding that he expects that the property market here to soften in the short term.

"However, in the long term, since land is very limited in Kuala Lumpur, things look promising," he said.

"The location of The Peak is fantastic as it is within walking distance of Suria KLCC and the Convention Centre," he added.

I-Bhd is also in talks with international hotel chains like Marriott, Starwood, Hilton and Accor to manage the property.

By New Straits Times (by Vasantha Ganesan)

Gamuda gains on report bid has support

GAMUDA Bhd, Malaysia’s second-biggest builder, rose the most in a week in Kuala Lumpur trading after a newspaper reported the company’s largest shareholder supports a takeover bid by a Middle Eastern fund.

At 12.30am, the stock rose 9 sen, or 3.7 per cent, to RM2.52, headed for its biggest advance since July 14.

A Middle Eastern fund has gathered enough support to make a takeover bid for the construction company, the paper reported, without saying where it obtained the information.

Gamuda’s largest shareholder, the Malaysian royal family in Perak, agreed to sell its 7.5 per cent stake to the fund, the paper reported. The acquisition of the royal family stake is crucial to any takeover, according to the newspaper.

Such a bid “is not attractive enough for the privatization to succeed,” Vincent Khoo, who has a “buy” rating on Gamuda at Aseambankers Malaysia Bhd., said in a report today. “The stock is still trading significantly below its core net assets value of RM2.90.”

Gamuda stock has tumbled this year after managing director Lin Yun Ling sold most of his stock.

By Bloomberg

Govt asked to temporarily ban exports of steel

Many property developers and contractors have urged the Government to impose a temporary ban on the exports of steel and allow it to be imported to stabilise rising prices and meet growing local demand.

Although there is currently no serious shortage of steel in the country, industry players fear that this situation might not hold on for too long as there are currently many projects being undertaken by the public and private sectors.

They also claimed that some steel traders and suppliers were manipulating steel prices. “Those who can afford to pay can get their supply of steel but the smaller developers and contractors who cannot pay a higher price may not be able to carry on with their projects,” said a developer.

Master Builders Association of Malaysia (MBAM) president Ng Kee Leen said it was important that the Government allowed all steel bars that met the Malaysian standard MS146 or its equivalent the BS4449 standard to be imported tax free. As it is, he said not a single steel bar had been officially imported since the Government lifted the ceiling price of steel about two months ago.

This was because what happened on the ground was very different and there was still a lot of confusion as to the type of steel that could be imported. “The Government must fully liberalise and clarify the process and procedure in the importation of steel,” Ng said, adding that international steel traders have lost confidence in Malaysia as they found the process and procedure of importing steel vexing.

He said if the Government did not take action now, more than 140 related industries including the tin mining, timber, electrical, air-conditioning and joinery industries might collapse.

The country consumes some two million tonnes of steel per year or about 150,000 tonnes a month. Steel prices have soared from about RM3,000 per tonne two to three months ago to RM4,200 per tonne depending on the term of payment.

“The rising price of steel is like a roller coaster except that it does not come down. The situation is very critical,” said Ng.

MBAM past president Patrick Wong said MBAM had earlier called on the Government to stockpile steel and stabilise raw material prices to help government and low-cost housing projects.

He also urged the Government to monitor the situation.

International Real Estate Federation (FIABCI) Malaysia Chapter president Datuk Richard Fong said many developers were facing a “double squeeze” from increased construction cost and falling sales.

Many contractors have refused to tender for new jobs although some developers have agreed to absorb any rise in cost of steel and cement. This is because they feel that other raw materials such as tiles, copper, wires and even rocks have also increased in prices.

By The Star (by S.C.Cheah)

Steel prices in UAE surge

DUBAI: Steel prices in the United Arab Emirates have risen almost 10 per cent in one week as demand for construction materials continues to drain the local market, traders said yesterday.

Gulf Arabs are investing heavily in real estate and suppliers of building material are struggling to keep up with demand in the UAE, the second largest Arab economy.

The rising cost of building materials is helping fuel inflation across the Gulf, where economies are flourishing on a more than sixfold rise in oil prices since 2002.

A tonne of reinforcing steel bar (rebar), used in construction, fetched around US$1,700 (US$1 = RM3.24) yesterday, up from around US$1,550 on June 13, dealers said.

By Reuters