Asian developers more upbeat

SINGAPORE: Asian property firms are beginning to see light at the end of the tunnel and several are positioning for an upturn even as the world economy struggles to recover from its worst recession in decades.

The mood among US and European executives at this week's Reuters Global Real Estate Summit is glum, but Asian counterparts are more upbeat with some revealing plans for new projects in anticipation of an upturn later this year.

For instance, Chinese commercial property developer SOHO said it has built up a war chest of US$1.9 billion to replenish its land bank and intends to start new projects in Shanghai and Beijing in coming months.

Indiabulls, India's third-largest listed property developer, aims to launch six to seven residential projects in the financial year ending in March 2010 on the back of an expected recovery in demand.

"The general mood has been cautious, but there is also optimism. Asian companies in general are in much better shape compared to their peers in other regions," said Ayala Land chief financial officer and Asian Public Real Estate Association president Jaime Ysmael.

Spurring the optimism in Asia is a recovery in residential markets, with price cuts drawing buyers in China, Hong Kong and Singapore, where saving rates are high and banks are prepared to lend.

The volume of transactions in these places are close to levels seen during the bull market of 2007 and residential property values have begun to edge upwards as developers such as Singapore's City Developments raise prices.

Asian property values did not rise as much as in the US and parts of Europe this decade. In dollar terms, property in countries such as the Philippines are cheaper than before the onset of the Asian crisis in late 1997.

Interest rate cuts and government stimulus plans are also helping regional property markets recover.

Singapore residential prices were supported by mortgage rates that were below rental yields, a Bank of America Merrill Lynch report said this week.

"At the current mortgage rate of around 2.75 per cent, our net cost of carry model implies that prices can rise by 30 per cent before home buyers enter negative carry," it said. The bank predicts Singapore home prices will rise 20 per cent next year.

Singapore's housing market has been hit hard by the downturn, with home prices plunging nearly 14 per cent in the first quarter of this year, the steepest drop in over 30 years, according to government data.

Separately, Nomura said unemployment was stabilising in Hong Kong and forecasts home prices and rents in the Chinese territory will rise by 22 per cent and 11 per cent, respectively, this year.

A poll of 10 analysts conducted in conjunction with the Reuters Global Real Estate Summit showed China home prices are expected to gain an average of 10 per cent between now and the end of 2010.

The outlook for Asia's office market remained negative but most developers said rents have stabilised after falling sharply in the fourth quarter of 2008 and earlier this year.

Some investors said any pick-up may not be sustainable.

"There is a risk that this is a bear market rally and the situation could reverse when such liquidity leave the cities or country, or there is new shock to the economies," said LaSalle Investment Management's Asia-Pacific head of research and strategy Kenneth Tsang.

By Reuters

Goldis in final talks with anchor tenants for GTower

KUALA LUMPUR: Goldis Bhd is confident of a good response for its soon-to-be-completed GTower and is in the final stages of negotiation with anchor tenants to take up space in the Grade A++ office building.

GOLDIS Berhad chief executive officer Tan Lei Cheng dropped in at the chess league just in time to watch her chess-playing father Dato Tan Chin Nam start off his game.

Executive chairman and chief executive officer Tan Lei Cheng said the anchors comprised companies in the oil and gas and information technology sectors as well as multinationals.

“It will take time but we are confident that GTower will be fully taken up. There are not many new stock in terms of offices in the city centre and most of the existing ones are quite old.

“Currently 40% of the total space has been taken up already,” she said after the group’s AGM yesterday.

GTower, which started construction in July 2006, is expected to be completed and operational in the fourth quarter.

The 30-storey twin tower GTower has over 500,000 sq ft of office space and CEO duplex offices available for lease. The G City Club Hotel, within GTower, is a boutique five-star hotel comprising 180 rooms.

Goldis has private equity investments in the country and China with focus areas in healthcare, property investment and development, information and communication technology, paper manufacturing, water treatment services and organic aquaculture.

Tan said the group recently signed a build, operate and transfer concession agreement and supplemental agreement via wholly-owned subsidiary Crest Spring (Shanghai) Co Ltd of a sewage treatment plant in Zou Cheng Industrial Park, Shandong Province in China.

“We are at the design stage now. It will take 1½ years for the plant to be ready. It fits into our investment strategy and is a long-term cash cow business.

“With our experience we can also look at the sewage treatment business in Malaysia in future,” Tan said.

The group already operates two sewage treatment plants in China.

On new investments, Tan said Goldis had no plans to invest in new businesses at the moment but would focus on growing its subsidiaries via mergers and acquisitions or organically.

Goldis’ private equity investments include Hoe Pharmaceuticals Sdn Bhd, Macro Kiosk Bhd and Protech Yu (Asia) Sdn Bhd.

Goldis recorded a 5% drop in net profit to RM8.2mil for the first quarter ended April 30 versus the previous corresponding period while revenue slipped 7.5% to RM43mil.

All resolutions were passed at the AGM and EGM yesterday.

By The Star (by Elaine Ang)

Glomac net profit up 66%

PETALING JAYA: Property developer Glomac Bhd’s net profit rose 66% to RM7.21mil in the last quarter ended April 30, as revenue rose 39% to RM99.89mil compared with the previous corresponding period.

This brings its full-year (FY09) net income to RM32.3mil, which was slightly lower than RM35.1mil achieved in FY08. Sales grew to RM352mil from RM324mil previously.

In a press release issued yesterday, Glomac attributed its improved performance for the year just ended to strong progress billings from on-going projects, with maiden contribution from new developments.

“Group profits for the year include RM4.4mil fair-value gain for the sale of Wisma Glomac 3,’’ it said, adding that minority interest was higher for the year due to higher contribution from 51%-owned Glomac Tower.

This was the primary reason from the decline in net profit despite higher revenue achieved for the year.

Glomac proposed a final gross dividend payout of 3.5 sen for FY09.

“Prospects in the current year remain healthy, driven by unbilled sales and new commercial launches,’’ group executive chairman Tan Sri FD Mansor said in the statement.

Total unbilled sales reached RM364mil as at end-April.

By The Star

MBSA to relax rules to attract foreign investments

Already open: The first phase of the i-City project has been completed.

The Shah Alam City Council (MBSA) is going easy on its strict rules on entertainment outlets in the city as part of efforts to attract foreign investors to the knowledge-based i-City development project.

With such a policy in place, Shah Alam residents may, within the next few years, see the city’s first cinema with the approval for the facilities having been granted.

The cinema is part of the final phase of the i-City, which comprises a shopping mall and a citywalk which are scheduled to be completed in 2015. The intelligent centre is located at Section 7 of the state capital.

“We are making an exemption for the i-City to encourage international companies and franchisors to invest in the intelligent centre,” Shah Alam mayor Mazalan Md Noor said.

“But they still have to adhere to the existing rules and regulations, especially on the operating hours,” he said.

According to Mazalan, the i-City had been conferred the International Park status by the Selangor government in October last year, allowing it to operate entertainment and lifestyle outlets such as cinemas and theatres, bowling alleys, family theme parks, restaurant and clubs.

He said although the International Park status also allowed restaurants in the i-City to sell liquor, this was not an automatic blanket maxim but subject to approval by the MBSA.

“In principle, we are going easy on the ruling for them, but it does not mean that it is automatic permission. The operators still have to apply for permits and we will look into their cases to make sure that they abide to the guidelines,” he said.

Mazalan said he hoped that the move would serve as a catalyst in boosting the development in the state capital.

“We hope the i-City, with its modern infrastructure and high-tech facilities, will function effectively as the city’s knowledged-based centre,” he said.

“We want the i-City to be an icon for the city and hopefully will be emulated in other areas of the city,” he said.

Shah Alam, with about 90% its population being Muslims, has always been strict on the entertainment outlets, with cinemas, pubs and snooker centres being banned.

But the city is a beautiful place to live, with its many natural parks and a handsome lake too. Traffic chaos is also almost unheard of in this garden city of orchids.

Having a cinema and other modern high-tech facilities in the i-City will complement the other cultural and recreational elements available in Shah Alam.

Residents and visitors can enjoy regular cultural activities at the Laman Budaya and soon watch theatre performances at the Shah Alam Royale Theatre.

“We are also processing applications from karaoke centres, so the residents will soon be able to enjoy that too,” Mazalan said.

Allowing the cinema to operate in the city has received mixed responses and reactions from the Shah Alam residents. Even the city councillors are split on the matter.

While some people agree with relaxing the rules, others feel that the city should maintain its sober identity, with no entertainment outlets.

“All the while we did not have any such outlets and this is what the residents want. Having such facilities would not make Shah Alam any better and might even result in negative influences and impacts, especially among our youths,” said Datin Nor’ini Md Top, a councillor in charge of Section 7.

“So I do feel that we should stick to the the status quo - no cinema,” she said.

Nor’ini said the MBSA should not make an exception to the i-City centre as other similar developments would also demand to be given similar concessions.

She felt that the authority should not bend the rules just to encourage more foreign investors to come and start their business at the i-City.

“Why do we have to sacrifice our own culture and ethics just for the sake of encouraging foreign investors?

“Unless the operator could ensure that they would only conduct constructive and educating activities, I believe we should stand by what the residents want,” Nor’ini said.

Councillor Ang Leng Kiat said the MBSA would have to make sure that the i-City operators provide healthy activities for the people.

Ang said it was only fair to seek the views of the residents on what they wanted.

“We are serving the people and if they want a cinema, then they should have it,” he said.

“But we have to make sure that the cinema operator adhere to our rules and regulations,” Ang said.

Adnan Jamburi said that relaxing the rules would be a boost the development and property value in the city.

He said the move would bring in foreign investors to the city, which was needed especially during the current economic slowdown.

By The Star (Stories by Salina Khalid)

Property market showing signs of recovery, albeit slowly

The Malaysian property market is showing signs of recovery, albeit at a slow pace, attributed to government spending and developers taking a cautious stance during the economic downturn.

"We are recording higher property volume, but lower value. The price is not plunging. It is just that the lower bracket of properties are selling now," said Dr Zailan Mohd Isa, director of the Valuation and Property Services Department under the Ministry of Finance.

According to data provided by the department, there were 23,256 unsold completed residential units in Malaysia as at March 31, 2.1 per cent lower than the same quarter last year.

In addition, there are 15,723 units with approved building plans - launched, but not constructed. Last year, the figure was 18,402 units.

For unsold properties under construction, there are 49,904 units versus 53,619 units last year.

"Due to the economy slowdown, developers have been cautious. Hence, there were less new products in the market. But overall, the performance in the sector remains healthy but most importantly, the government has to secure jobs, facilitate domestic spending and control inflation," he said.

Zailan was speaking at a media conference in Kuala Lumpur yesterday, in relation to the 20th National Real Estate Conference that will be held from August 11-12 at the Kuala Lumpur Convention Centre.

The event is hosted by the Association of Valuers and Property Consultants in Private Practice Malaysia and Institution of Surveyors Malaysia.

The conference will underline issues faced by the real estate sector, covering residential, office, retail, hotel and industrial markets.

Organising chairman Elvin Fernandez said the conference was timely and important to re-calibrate the fundamentals in the Malaysian real estate market. He said there is a self correction mechanism in the market now as the country's 2,000-odd developers are holding on to their launches.

By Business Times (by Sharen Kaur)

Khazanah, Boustead in RM50m KidZania venture

A RM50 million educational theme park from Mexico, KidZania, will open by early 2012 at a new building in Mutiara Damansara in Selangor, just across from the Curve shopping mall.

The award-winning indoor park, which allows children to role-play adult occupations in a replica city with activities designed to mimic real-life and functioning economy, is popular in cities like Tokyo and Jakarta besides its home country.

"It is a commercial investment but it also hits the right note on all fronts. We are excited. This world-class facility will fill the current void of entertainment and education in our tourism sector," Khazanah Nasional Bhd managing director Tan Sri Azman Mokhtar said at a press conference in Selangor yesterday.

Once completed, the park will create 400 jobs in the service industry, he added.

The project, an 80:20 joint venture between Khazanah and Boustead Holdings Bhd, is the second theme park investment for Khazanah after the RM750 million Legoland in Iskandar Malaysia.

KidZania Kuala Lumpur is expected to attract 500,000 visitors a year. Boustead, developer of Mutiara Damansara and owner of the Curve, will tear down a building currently occupied by McDonalds to build a seven-storey structure to house KidZania Kuala Lumpur. The theme park will take up about 60,000 sq ft on levels six and seven of the new building, which will be linked to the Curve via a sky bridge.

Xavier Lopez Ancona, founder and chief executive officer of KidZania S.A. de C.V., said Khazanah may recoup its investments in as soon as five years based on the hot response for its parks in Tokyo and Jakarta.

"The typical payback period for theme parks is around seven to nine years," said the Mexican entrepreneur who started the first KidZania in the Santa Fe Shopping Mall in Mexico City in 1999.

Entrance fees in Jakarta are priced around US$12-US$13 (RM42-RM46) for kids, while accompanying adults pay a lower price of about US$9 (RM32), Ancona said.

Other operating revenues also come from food and beverage sales and fees paid by marketing partners who want to put up their brands in the mock-up city.

KidZania also owns and operates another park in Monterrey, Mexico. It is building a third one in the country at Cuicuilco.

Outside Mexico, KidZania operates through franchise in Lisbon, Portugal; Jakarta, Indonesia and in the Japanese cities of Osaka and Tokyo. In Tokyo, tickets are sold out every day since its opening in 2006, with 955,000 visitors last year alone.

New KidZanias are coming up in Dubai, Seoul, Shanghai, Bangkok, Santiago (Chile), Mumbai and Istanbul.

By Business Times (by Chong Pooi Koon)

No major issue in finding new buyer for Iskandar land: Azman

KHAZANAH Nasional Bhd says it sees "no major issue" in finding new investments to replace the Dubai property developer which recently dropped a land purchase deal in Iskandar Malaysia.

Damac Properties (Malaysia) Sdn Bhd, one of Dubai's largest private developers, recently said it would not pursue the plan to buy land in Nusajaya for RM396.5 million.

"It's not a major issue. The Damac plot of land is a good site and there is interest shown for the site.

"We are confident there will be replacement coming in," Khazanah's managing director Tan Sri Azman Mokhtar told reporters in Petaling Jaya yesterday.

By Business Times

Mulpha confident of facing challenges

MULPHA International Bhd is confident of withstanding the challenges arising from the unprecedented global economic turmoil.

Its executive chairman, Lee See Huang, said companies faced problems and hoped for recovery to grow.

"We are confident of the quality of our developments and assets and have a strong balance sheet to ride out of the current economic storm," he told a media briefing after the the company's annual general meeting today.

Mulpha is involved in real estate and property-related and financial services, with operations and investments in Malaysia, Vietnam, Singapore, China, Hong Kong and Australia.

By Bernama

LaSalle ready to invest in Asian real estate

SINGAPORE: LaSalle Investment Management said yesterday it has US$3bil available for investing in Asian real estate and is ready to re-enter the market after nine months on the sidelines, focusing initially on Japan and Australia.

“The process of debt restructuring and market resetting and capital and economic stabilisation seems to be happening fastest in those countries,” chief investment officer for Asia Pacific Ian Mackie told the Reuters Global Real Estate Summit.

“Japan has had a price correction that has been very significant (and) people forget that Japan is still the second biggest economy in the world,” he added.

The US real estate investment firm, which has US$8.7bil in Asian assets, favours “gateway” cities such as Tokyo and Osaka in Japan and Sydney, Melbourne and Brisbane in Australia.

MacKie said LaSalle’s US$3bil war chest, most of it from a fund raised around the middle of last year, would probably translate into acquisitions worth US$6bil as the firm planned to keep debt levels low.

The firm, the investment arm of property services firm Jones Lang LaSalle, used to borrow up to 75% to fund an acquisition in Japan but will likely seek about 50% financing under current market conditions.

Asian property investment sales fell sharply in the second half of last year, hurt by a tightening of credit markets and a collapse in investor confidence following the collapse of Lehman Brothers in September.

For the first three months of 2009, investment sales fell 83% to US$3.1bil from a year ago, according to data compiled by rival property services firm CB Richard Ellis. The worst-hit markets were Japan, Hong Kong and Singapore.

Mackie said LaSalle invested in most types of property but was keenest on warehouses, hotels and offices. Besides Japan and Australia, its other preferred destinations include China and South Korea.

But the firm will probably give Indian real estate a miss as it feels the potential returns do not compensate for the risks.

“We have not seen an attractive investment in India in terms of risk-adjusted returns ... We can get the same returns in Japan and the risks are much, much higher in India,” he said.

LaSalle said that while it saw opportunities in Japan and Australia, it remained cautious about Asian real estate in the near-term and warned that a pick-up in home sales in China, Hong Kong and Singapore could be a “bear rally”.

Kenneth Tsang, the firm’s Asia-Pacific head of research and strategy, said the spike in apartment sales was driven by pent-up demand and low mortgage rates and may not be sustainable.

By Reuters

YTL to subscribe to Starhill REIT units

PETALING JAYA: YTL Corp Bhd will subscribe for up to 75% of the total rights units issued by Starhill Global Real Estate Investment Trust (REIT) under its proposed one-for-one basis.

In a statement to Bursa Malaysia yesterday, the company said it had entered into a sub-writing agreement with DBS Bank Ltd, Merrill Lynch (Singapore) Pte Ltd and Credit Suisse (Singapore) Ltd for the purpose.

Starhill Global REIT, which is listed on the main board of Singapore Exchange Securities Trading Ltd, has proposed to issue 963.72 million new units at issue price of 35 Singapore cents per unit.

As at June 22, YTL Corp has an aggregate deemed interest in 256.1 million units, representing about 26.6% stake in Starhill Global REIT.

By The Star

S'pore Starhill REIT rights issue to raise S$337m

SINGAPORE: Singapore's Starhill Global Real Estate Investment Trust yesterday proposed a rights issue to raise S$337.3 million (S$1 = RM2.43) to reduce debt and get new funds for possible acquisitions.

The property trust, which is controlled by Malaysia's YTL Corp Bhd (4677), will offer shareholders one new unit for every existing share held at S$0.35 per rights unit - a discount of about 45 per cent to the last closing price of S$0.64.

YTL, whose units own about 26.6 per cent of Starhill, will take up its entire allotment of rights shares and will subscribe for up to 75 per cent of the rights unit, the property trust said in a stock market filing.

DBS is the sole financial adviser to the deal and the rights issue will be fully underwritten by DBS, Merrill Lynch and Credit Suisse.

Starhill's assets include stakes in Wisma Atria and Ngee Ann City, two large malls on Singapore's Orchard Road shopping belt.

By Reuters

Oriental in RM200m hospital venture

Auto and plantation group Oriental Holdings Bhd (OHB) plans to open a RM200 million specialist hospital in Malacca in 2012 to strengthen its healthcare division.

Called the Melaka Straits Medical Centre, OHB will hold a controlling 51 per cent stake in the hospital that will be located in the new reclaimed coastal tourist township of Klebang in Malacca.

Boon Siew Sdn Bhd, the controlling shareholder of OHB, will hold another 20 per cent, followed by Bagan Specialist Centre with 29 per cent.

Boon Siew also holds the majority stake in Bagan Specialist Centre which is located in Seberang Prai, Penang.

"This 300-bed hospital will offer multi-diciplinary specialist healthcare services with niche specialisation in heart, lung and cancer treatment," OHB director Datuk Dr Tan Chong Siang told Business Times.

Dr Tan said Malacca was chosen because land was available. The reclamation project there is handled by Ultra Green Sdn Bhd, a construction and property development subsidiary of OHB.

The hospital is expected to create 500 new jobs. Construction is due to start in November this year.

"We choose to expand at this time of challenging economic situation because we see the synergistic opportunity presented in a field we have been involved in for the past 22 years," said Dr Tan, who is also the medical superintendent of Bagan Specialist Centre.

"It is a concept well received by the public from our track record, we believe we are ready now for expansion," he added.

According to Dr Tan, the existing hospital, Bagan Specialist Centre in Seberang Prai in Penang, operates on the basis of good quality at minimum cost, minimum discomfort and optimum speed. It plans to do the same for the new hospital.

In the year ended December 31 2007, Bagan Specialist Centre made a net profit of RM6.83 million on revenue of RM39.23 million.

As for OHB, its net profit eased 3 per cent to RM314 million in 2008 while revenue was up 14 per cent to RM5.1 billion.

By Business Times (by Vasantha Ganesan)

Khazanah: KidZania to be opened by 2012

KHAZANAH Nasional Bhd and its partner, Boustead Holdings Bhd, expect the indoor educational theme park, KidZania Kuala Lumpur, to be opened by 2012.

Khazanah managing director, Tan Sri Azman Mokhtar, said the RM50 million theme park would occupy about 60,000 sq ft at the new building in Mutiara Damansara.

"About 500,000 visitors are expected per annum," he told reporters after the signing of licensing agreement between Rakan Riang Sdn Bhd and KidZania SA de CV today.

Rakan Riang is a joint-venture company between Khazanah and Boustead.

Azman said the theme park was expected to create 400 jobs.

He said the company would announce the entrance fees soon.

Founder/chief executive officer of KidZania SA de CV, Xavier Lopex Ancona, said it cost between US$12 and US$13 to visit KidZania in Jakarta.

KidZania is a family entertainment centre where children play adult roles in a child-sized replica of an actual city with streets, buildings, shops as well as vehicles moving along its streets.

The first KidZania was opened in 1999 in the Santa Fe Shopping Mall of Mexico City. The others are in Japan, Indonesia and Portugal.

By Bernama

Malaysian builders set for 'fat years'

Malaysian construction stocks including Gamuda Bhd, IJM Corp and WCT Bhd are set to benefit from several “fat years” as the government accelerates a slew of development projects, Maybank Investment Bank Bhd said.

Prime Minister Datuk Seri Najib Razak is yet to award RM12 billion (US$3.4 billion) of contracts from two stimulus packages, Wong Chew Hann, a Kuala Lumpur-based analyst at Maybank, said in a report today. The first-quarter economic slump of 6.2 per cent underlines the need for faster project implementation, Wong said.

“The momentum of awards for construction jobs should quicken,” Wong said in the report, reiterating an “overweight” rating on the industry. “Tenders and awards ought to lift the valuations of construction stocks.”

The rollout of all outstanding contracts has the potential to trigger Malaysia’s first building boom since the Petronas Twin Towers and the Kuala Lumpur International Airport projects before the 1997-1998 regional financial crisis, Maybank said. Steelmakers, property developers and construction stocks are already among the year’s top climbers on the nation’s main index.

IJM, helping to build a tunnel for an interstate Malaysian water project, has almost doubled in 2009 and is the second-best performer on the Kuala Lumpur Composite Index. Gamuda, jointly building a railway in the north of Malaysia, has surged 33 per cent. WCT has jumped 27 per cent.

The government may hand out infrastructure projects valued at between RM8 billion and RM10 billion this year, followed by a similar total in 2010, Bank of America-Merrill Lynch said today after meeting executives at IJM and Gamuda.

More Spending

“The government will continue to spend, spend and spend,” Melvyn Boey, a Singapore-based analyst at Bank of America- Merrill Lynch, said in a report. Contracts awarded in the next 12 months to 18 months will have a “big multiplier effect” on the economy, Boey said.

According to Maybank, the funds from Najib’s two stimulus packages will coincide with the acceleration of spending under a five-year government industrial plan, devised before the current crisis, which stretches through 2010. Najib has an additional RM103 billion, almost half the entire allocation, to spend before the end of next year, Maybank said.

The biggest projects due by the middle of 2010 are the remaining components of a water-transfer project in central Malaysia, already partly awarded to IJM, that are probably worth a combined RM6.2 billion, Maybank said.

The government will also award a RM2 billion contract to build a low-cost terminal at Kuala Lumpur’s airport, and order an extension to a railway network in the Klang Valley surrounding the Malaysian capital, a job that might be worth as much as RM10 billion, the bank said.

Najib, who came to office in April and inherited the government’s smallest majority in more than 50 years, probably has only a 12-month window to implement the biggest projects in order to strengthen the economy before the next general election, due by 2013, Maybank said.

By Bloomberg

Muhibbah MD sees better year for infrastructure construction

SHAH ALAM: Muhibbah Engineering (M) Bhd sees better performance from its infrastructure construction business this year due to cheaper materials after the division posted losses last year.

Nevertheless, the current general business environment remains slow and a pick-up in the construction industry is not seen for another six months, said managing director Mac Ngan Boon.

Mac said the group’s infrastructure construction business was expected to perform better this year as raw material prices overall had decreased by 10% to 15%.

“Last year was a difficult period as we had to endure high prices for raw materials and scarcity of equipment for our heavy engineering works.

“Going forward, we see a trend reversal and that (will have a) positive impact on our ongoing jobs,” he told reporters after Muhibbah’s annual general meeting yesterday.

The company’s infrastructure construction division registered a pre-tax loss of RM21.5mil in its previous financial year ended Dec 31 mainly due to increased costs in oil, construction materials, transportation as well as other operating costs.

This had a negative impact on the company’s net profit, which fell to RM21.8mil from RM70.2mil in FY07, although revenue rose to RM2.1bil from RM1.4bil.

Mac said although the construction business was currently slow, “our present strength lies in the orderbook that should last another two years during which we can replenish our orders.”

“The secured projects also give us the choice to select projects that would be highly beneficial for the company and not just aggressively fight to get jobs,” he said, adding that the company had bid for jobs worth RM3bil for both local and overseas projects.

“But the market environment is more competitive today,” Mac acknowledged when asked on the success rate of the jobs tendered for.

Muhibbah’s order book for construction projects stands at RM2.6bil currently with 55% local projects and the rest goreign.

On its crane business, Mac believes that demand will be more robust in the latter part of the year.

By The Star

Swiss-Belhotel sees ringing success

The name Swiss-Belhotel International (SBI) may not ring a bell with most Malaysians, but it soon will.

This Hong Kong-based hotel management company, which is yet to open its first Malaysian hotel, will by end-2010 operate some 1,800 rooms in Malaysia and create between 2,000 and 2,500 jobs in the market.

It is also in talks with other developers that will lock another 1,000 rooms under its management by end-2011.

Given the anticipated openings, it is not surprising that SBI's director of projects and developments for Malaysia Carlos Velho expects that Malaysia will be the largest profit contributor to the group in two years.

"We are confident that Malaysia in the next two years will be the biggest net profit churner for the group," he said, adding that now the group's major contribution comes from Indonesia.

SBI manages 26 hotels in 13 countries. Another 26 are under development.

"We are negotiating for openings in Johor, Sarawak, Penang and Langkawi," Velho said, adding that it was close to signing on the dotted lines for all these deals.

The new projects are either four-star or five-star properties with 300 rooms on average and are slated for opening in 2011 and 2012.

Founded in 1987, Swiss-Belhotel today comprises Swiss-Grand (for five-star and boutique brands) and Swiss-Belhotel (for four- and five-star brands).

In more recent years, it created Swiss-Inn and Swiss-Express brands for three- and two-star operations.

The confirmed openings in Malaysia are Golden Palm Tree Sea Villas and Spa, Swiss-Belhotel Mont Kiara Suites and Residences, Swiss-Belhotel Zenith Kuantan and Grand Swiss-Belhotel Kota Kinabalu.

By Business Times (by Vasantha Ganesan) (Posted on 22 June 2009)

Swiss-Belhotel has hands full with new projects

Three hotels and a serviced residence are keeping Hong Kong-based hotel management firm Swiss-Belhotel International (SBI) awfully busy in Malaysia.

SBI, which will open the five-star Golden Palm Tree Sea Villas and Spa Sepang in December 2009, is also working on three other hotel projects which are under development in Pahang, Sabah and Kuala Lumpur.

In Pahang, SBI will manage a 515-room Swiss-Belhotel Zenith Kuantan together with a convention centre that can accommodate 6,000 people. The hotel, slated for opening in October 2010, forms part of the Putra Square Kuantan being developed by Zenith Aim Sdn Bhd.

SBI's director of projects and developments for Malaysia, Carlos Velho, is excited about the project as he feels the opening will fill an existing void in the state capital - the need for a five-star city hotel with convention facilities.

"There is no facility equal to this in Kuantan and its opening will bring the meeting, incentive, convention and exhibition business to the convention centre," Velho told Business Times in an interview.

Accordingly, Velho expects occupancy to touch 80 per cent in the first year of operations - a commendable figure for a new hotel. It hopes to garner an average room rate (ARR) of between RM180 and RM230 per night.

The project in Kota Kinabalu, Sabah is a 335-room sea-fronting five-star hotel. The hotel, to be named Grand Swiss-Belhotel Kota Kinabalu, is owned by China based i-Zenith International Pvt Ltd.

This hotel forms part of the 1.22ha Kota Kinabalu City Waterfront integrated mixed development by Sunsea Development Sdn Bhd. The project will also house a 400,000 sq ft retail space and another 100 units of designer suites.

To be ready in December 2010, Velho expects this hotel to draw a foreign crowd who will help fill up its projected 70-75 per cent average occupancy in the first year. It hopes to achieve an ARR of RM350.

The hotel complies as a green building, and thus expects that while cost of construction may be higher, its cost of operations will be lower from water harvesting and savings on lighting and air-conditioning (typically the highest cost after wages).

In Mont Kiara, a 584-unit Swiss-Belhotel Mont Kiara Suites and Residences is being built by a public-listed company.

Meanwhile, The Golden Palm Tree Sea Villas development in Sepang will open its doors December 2009.

Velho said that reception to the project was so good that it had to increase the number of villas to 399 from 366.

The project guarantees a return of 8 per cent in the first and second year and to gradually improve from the third year onwards.

The villas, which have all been sold, is leased back by the developer of the project Sepang Gold Coast Sdn Bhd's unit Sepang Duta Sdn Bhd.

Sepang Gold Coast is a 70-30 joint venture between CNI Corp and Permodalan Negeri Selangor Bhd (PNSB).

By Business Times (Posted on 22 June 2009)

Parent firm gives IOI Properties the edge

Artist’s impression of Pinnacle Collection. Datuk Lee Yeow Chor (inset) says the company is closely monitoring the Singapore property market to ensure the timely launch of the projects

IOI Properties Bhd will be leveraging on the financial strength of its parent, IOI Corp Bhd, to build a greater presence in the Klang Valley and Singapore property markets.

Since being taken private in April, the 95.33% subsidiary of IOI Corp has greater liberty to plan and decide on the direction and projects it wants to undertake.

IOI Corp group executive director Datuk Lee Yeow Chor said although the level of activities would not change much from what the company had done previously, it was in a better position to leverage on the group’s financial strength to facilitate funding requirements for land acquisitions and move projects ahead.

According to Lee, property is all about holding power and having the financial strength to hold out and mitigate against the prevailing challenging market conditions, including slow sales; are important for property companies.

Despite the severe market crunch in Singapore since February last year, IOI Properties proceeded with the construction of its Seascape Collection residences on Sentosa Cove. The construction of the project has reached 40% to-date.

The 1.44-ha Seascape project is a 50:50 joint venture between IOI Properties and its Singapore partner, Ho Bee Investment Ltd.

It comprises two eight-storey condominium blocks of 151 units of various sizes, tentatively priced from S$2,500 to S$2,800 per sq ft.

IOI’s second project in Singapore, the Pinnacle Collection – which is 65%-owned by IOI Properties and 35% by Ho Bee – will be undertaken by Pinnacle (Sentosa) Pte Ltd. The 2.12-ha site was tendered for S$1.1bil.

The 99-year leasehold land is the final piece of condominium land to be launched by Sentosa Cove and has a maximum permissible gross plot ratio of 2.6.

The site will have seven 18-storey blocks and one 20-storey block of luxurious condominiums. It is one of the two condominium parcels flanking the entrance of the marina leading into Sentosa Cove.

Lee said the launch of The Pinnacle would depend on the take-up for the Seascape residences.

IOI has plans for a third project in the city state, comprising medium to medium high-end residences on a 1.44-ha site near Novena Square and Orchard Road.

He said the company was closely monitoring the Singapore property market to ensure the timely launch of the projects to optimise their value.

“The completion of the two integrated resorts in Singapore later this year will be the catalyst for further economic growth and market upturn in the city state,” Lee said.

In the last two months, the market for medium to mid-high end property in Singapore had shown encouraging signs of an upturn, he added.

Things are also looking up for the Klang Valley property market and demand is expected to recover by year-end.

For the financial year ending June 30, 2010 (FY10), project launches worth RM580mil have been lined up in the Klang Valley, including in Bandar Puteri, Bandar Puchong Jaya and IOI Resort.

A new greenfield development, Sierra Puteri, a mixed housing development on 194ha in the Seri Kembangan-Cyberjaya area, is also in the pipeline for launch in the first quarter of next year. There will also be a 22-ha commercial precinct in the RM2bil development. Lee expects the company’s property sales to bounce back from RM630mil recorded last year to RM650mil next year. This year, it expects to turn in sales of RM610mil.

“We will also be placing more focus on investment properties. For FY10, we expect more than 15% of the company’s earnings to come from property investment and the balance from property development,” he said.

Last year, income from property investment contributed 10% to the bottomline of IOI Properties and about 22% to 25% of IOI Corp’s earnings.

General manager for group operations Lee Yoke Har said besides leveraging on the good location of the company’s land bank and strong branding, it also emphasised on good community relations and programmes to promote wholesome living and safe communities in all its townships.

It set up a dedicated community website, Myioi.com, in 2000 that has become a popular communication tool for residents of its projects.

Other initiatives include the IOI Privilege card, which is a discount card offered to residents when they patronise any of the participating outlets in the townships.

“The next project to be rolled out will be free WiFi within our townships and ‘intercom connection’ for residents via the 015 IP phone,” she added.

By The Star (by Angie NG) (Posted on 22 June 2009)

Higher demand for bricks in Johor

DEMAND for bricks – one of the main components in the construction of any building – was quite badly hit by the economic slowdown, but signs of improvement are showing, especially in Johor in recent months.

Major brick manufacturers in the state are now starting to receive orders from contractors and buyers, not only in Johor but also from Singapore.

Demand is also likely to get better in the second half of the year after a sluggish second half last year.

The price for common clay bricks is now 25 sen to 27 sen each and it is largely determined by the location of the brick plants and the distance between them and the projects.

It was priced at 35 sen when crude oil price was at US$110 per barrel in mid-2008 and also when demand for bricks started to decline.

Batu Pahat-based Kia Lim Bhd executive chairman Datuk Ng Eng Sos told StarBiz the Federal Government had played a crucial role in helping those affected by the current global economic downturn.

“The RM67bil economic stimulus package is helping to cushion off the effects faced by businesses and companies,’’ he said.

He said new public projects such as schools, hospitals, government staff quarters and police stations would help construction-related companies sustain their operations.

The private sector had already cut their spending in the second half of 2008 following the credit crunch in the United States and the financial crisis in Europe. The trend was likely to remain until year-end, he said.

Construction-related companies were pinning their hopes on public projects due to the softening of private and commercial projects, he added.

“What’s important now is the swift implementation of the projects by the relevant government agencies.’’

He said the company was also banking on the construction activities by both public and private sectors in Iskandar Malaysia to boost demand for its products.

Ng noted that several projects were already off the ground or would be implemented soon in the country’s first economic growth corridor despite the slowdown.

He said the assurance given by Prime Minister Datuk Seri Najib Razak that the Federal Government was committed to develop the area bode well for the construction sector in Johor.

Ng said demand for bricks from Singapore was also positive in recent months as there were several ongoing major public and private projects in the republic. “Traditionally, buyers from Singapore will choose brick manufacturers from Johor due to the long business relationship between the two areas and their close proximity,’’ he said.

Kia Lim is one of the few major producers of facing, common and paver bricks in Johor and currently has a 30% market share in Johor and Malacca. The company markets 80% of its products locally and exports the rest to Singapore.

For the financial year ended Dec 31 (FY08), it registered net profit of RM3.65mil on revenue of RM59.6mil compared with a net loss of RM1.32mil on revenue of RM49.34mil in FY07.

Another company, Claybricks & Tiles Sdn Bhd, sees equal demand for its bricks from the public and private sectors in Johor for this and next year.

Managing director Dr Tang Hai Chiang said the supply of bricks was mostly localised as the product was sourced by buyers from the same states.

“It has to do with the logistic and transportation issues as these two factors could determine the price of bricks in the market,’’ he said.

Claybricks & Tiles is the largest maker of fine quality clay products in Malaysia, producing 10 million bricks monthly at its plant in Kota Tinggi.

It produces facing bricks (60%) and common and paver bricks, and about 90% of its products are exported to Japan, Taiwan, Hong Kong, Singapore and the Middle East.

“Common bricks are essential items in the construction industry and I personally don’t see any substitute,’’ said Tang.

Like Ng, Tang said that demand for common bricks in Johor had improved much in the first half of 2008 and likely to get better in the second half.

Many did not know that the prices of bricks in the market were actually determined and controlled by building dealers and not the manufacturers, he said, adding: “The prices can fluctuate five to six times a year and they also depend on demand and supply.’’

However, Tang said the prices in Malaysia were still low and the export business was good because of the abundance of raw materials and low labour costs.

Tang said in the last 10 years there were about 400 common brick manufacturers in the country but 50% of them had since closed down due to stiff competition. In Johor there are only 10 left now.

By The Star (by Zazali Musa) (Posted on 22 June 2009)

Construction sector shows positive signs

The construction sector in Johor has been showing positive signs in the last three months after experiencing a slowdown in the second half of 2008.

Sin Sin Construction Sdn Bhd managing director Tan Wee Hiong said this was due to the implementation of new public projects in the state.

“The government-led projects are bringing relief to the construction industry during the current slowdown as the private sector had cut its spending,’’ he told StarBiz.

Tan hoped the relevant government agencies would be more efficient and swift in implementing the projects under the second stimulus package as they would benefit the construction industry.

He also hoped that the private sector would not further cut their spending as both the public and the private sectors played an important role even during a recession.

Banks in Malaysia had also played a major role by continuing to assist businesses and companies financially, Tan said, adding that low interest rates for housing loans offered by banks and special packages by housing developers also helped developers to launch new properties.

“It is okay if the number of units launched is smaller unlike during good times. Its better to have something rather than not having anything at all.’’

Tan said the slowdown in the second half of 2008 had stabilised prices of building materials, including common bricks.

He said Singapore also played an important role in Johor’s economic performance as both countries were closely linked economically.

Despite the recession, there were several ongoing major public and private projects in Singapore and demand for building materials from Johor for Singapore customers was still “healthy”, he said.

“When Singapore fully recovers, Johor will be the first to benefit as the city state needs more workers and Johor is traditionally the main supplier of labour there,’’ Tan added.

By The Star (by Zazali Musa) (Posted on 22 June 2009)