AGB makes maiden property foray into Penang

A HERITAGE restoration project along Penang's old waterfront in George Town will serve as Kuala Lumpur-based Asian Global Business Sdn Bhd's (AGB) maiden foray as a property developer next year.

The 'Pier At Weld Quay' project, which has a gross development value of RM500 million, is being touted by its developer as "a waterfront development with a difference" since it will involve the restoration of six heritage buildings and the construction of seven new structures.

Components of the project, which is being sited on a 1.3ha plot along Lebuh Pantai-Gat Lebuh China and Weld Quay, will include a boutique, hotel, commercial plaza, tourism school, retail podium and apartment suites, and townhouses.

"The project will break ground by the first quarter of 2008 and completion is expected by the end of 2011," AGB's chairman Kate Lim told Business Times.

The project will be soft launched in January next year.

Lim said the 'Rice Miller' boutique hotel, which will boast 100 rooms, will serve as a new hospitality brand which AGB will develop.

"The project will be marketed to investors in countries like Indonesia, Singapore and India, and we also intend to tap into the 'Malaysia My Second Home' market," she added.

"We have engaged Penang-based architects and conservation specialists for this project and are complying with the 51.7m height restriction imposed by the local authorities."

She said the 105 apartments would boast floor spaces between 1,500 sq ft and 3,500 sq ft and priced in the range of RM700 per sq ft.

AGB's chief executive officer Dr Noraini Abdullah said the company is currently in negotiations with the owners of the Royal Customs and Excise offices to lease the building (which will encompass the project) on a long-term basis.

She said the project will be funded through debt financing with a RM120 million borrowing.

AGB is a tourism and property development company primarily engaged in the conservation of historic resources.

The firm's entry into Penang and its proposed project will now see the development of the island's fifth waterfront development after E&O Property's 'Seri Tanjung Pinang', CP Land's 'Queensbay' development, Bayan Mutiara by PDC Properties and IJM Corp Bhd's The Light' project.

Following the reclamation of land east of Lebuh Pantai in the 1880s, Pengkalan Weld or Weld Quay became the sea-front road of Penang's port settlement.

Today, Weld Quay is home to the Tanjung City marina, water clan villages, 19th century offices belonging to European shipping agencies, along with godowns and the ferry terminal managed by Penang Port Sdn Bhd.

By New Straits Times (by Marina Emmanuel)

Brem plans Prima Pelangi expansion

BREM Holdings Bhd, a property and construction company, wants to buy more land in Mont' Kiara and Segambut Dalam to expand its ongoing Prima Pelangi project.

The project, sprawled over 28 hectares and located in Segambut Dalam, is being developed by its unit Harmony Property Sdn Bhd in three phases until 2014. It started in early 2003.

According to Harmony project manager Chia Thye Kong, the current plan calls for the development of properties worth some RM600 million.

But Brem plans to add new components within the development to make it more exciting and to raise the value of the project.

"The original development plan comprising mostly apartments and condominiums was firmed up in 2002. We now plan to build bungalows, semi-detached and double-story houses and luxury condominiums under phase two and three and also on the new landbank that we plan to buy," Chia said in an interview.

He said Harmony may also include a business centre in the plan.

The company is looking at a few parcels of agricultural land priced between RM60 per sq feet and RM100 per sq feet.

"We are already in talks with landowners to acquire between three and five acres in different areas but we will be quite selective to ensure it fits into our business model," added Chia.

Harmony has launched the first phase comprising 188 units of double-storey houses, 16 units of 21/2-storey super link homes and 388 units of medium-cost apartments, which have been sold and now occupied.

Phase one also consists of the Rosvilla condominium with 174 units, priced between RM238,000 and RM288,000, which is still under construction.

Some 60 per cent of Rosvilla units have been sold since its launch a month ago. It will be completed by the end of 2009.

Phase two will include 412 condominium units, which will be launched by end-2008, priced more than RM250,000 each. Around 1,050 units of medium range apartments would be launched in 2009 and 2010.

Under phase three, a total of 1,051 condominium units will be launched in 2011 and 2012.

"Looking at the take-up rate of Rosvilla, we will revise the properties in the remaining phases to include high-end developments taking into account market trends," he said.

By New Straits Times (by Sharen Kaur)

WCT Engineering to take unit private for RM504m

WCT Engineering Bhd will take its property arm WCT Land Bhd private for RM504 million to speed up growth and boost its earnings.

The group can now streamline and rationalise resources to realise cost-savings and improve operational efficiencies.

WCT Engineering executive director Loh Siew Choh said that although it was the holding company (at 65 per cent), it was unable to exercise direct management control over its subsidiary due to corporate governance.

"With it being privatised, the management can have a direct influence on day-to-day operations. We need to restructure and focus because the group is growing very dynamically, and we hope WCT Land can experience similar growth," he told Business Times yesterday.

"Once under WCT Engineering, we can participate in bigger ventures," he said, but declined to elaborate.

With WCT Engineering having construction projects in the Middle East and Vietnam, Loh said he hopes the property arm will now be able to operate in similar locations.

"When you go overseas, you find that you need a bigger and stronger balance sheet because these deals are quite big," he added.

The group plans to bid for more construction and property development projects internationally.

For now, WCT Land, which contributes 20 per cent to the group's profit, does not have any deals in the Middle East, but has started to look at the Vietnamese market.

"We haven't received any investment certificate for property projects in Vietnam," Loh said.

Overseas construction projects make up 60 per cent of WCT Engineering's earnings.

On the privatisation, WCT Engineering is offering 0.524 of a new subdivided WCT Engineering share for every WCT Land share it does not own.

WCT Engineering said the offer values WCT Land at RM2.09 per share, a four per cent premium to WCT Land's last traded price of RM2.01.

It is also offering 1.049 new shares for every WCT Land convertible debt securities it does not hold at RM4.18 each.

"It is a fair deal for shareholders of both companies with this share exchange. We are providing WCT Land shareholders a direct participation in the group's business, which contributes 80 per cent to overall profits," said Loh.

Earlier this month, WCT Engineering announced plans to split each of its shares into two. Loh said the privatisation could be done within four to six months depending on regulatory approvals.

The Employees Provident Fund is a major shareholder in WCT Engineering with 12.44 per cent stake and 4.84 per cent in WCT Land as at October 31.

By New Straits Times (by Jeeva Arulampalam)

Enhancing the value of WCT Engineering

PETALING JAYA: WCT Engineering Bhd (WCTE) has jumped onto the privatisation bandwagon in Malaysia.

The construction group made a RM503.5mil voluntary takeover offer, via an issue of new shares, to privatise its 64.8%-owned property unit, WCT Land Bhd (WCTL), at RM2.09 per share.

“It will be a significant enhancement for the group if we merge the two companies together. It is a value-enhancing deal for WCT Land,” executive director Loh Siew Choh told StarBiz yesterday.

WCT Engineering's RM102mil Al-Seef flyover in Bahrain, completed in 2005

Loh said it was difficult to move as a group when WCTL was a listed entity that was required to be run by separate management team, and there were rules and regulations to observe.

Making WCTL a wholly-owned subsidiary would help clear these obstacles, thus enabling the property arm to follow in WCTE's footsteps abroad.

“Our plan is to bring WCT Land to all the places where the parent company is already established,” Loh added.

WCTE has built a strong footing in the Middle East over the past years.

Its solid track record has won the group several mega jobs, such as the RM4.6bil racecourse in Dubai and the RM2.1bil Formula One circuit in Abu Dhabi. WCTE has 50% stakes in the two projects.

Under the proposed exercise, WCTL shareholders would receive 524 WCTE shares (to be issued at RM3.985 each) for every 1,000 shares held in the property company.

An aerial view of the Bahrain International F1 Circuit

WCTE also proposed to acquire all the outstanding five-year 3% convertible redeemable registered debt securities that have nominal value of up to a total of RM61.25mil in WCTL not owned by it.

The acquisition of the debt securities will be settled by issue of shares on the basis of about 1.049 shares for every RM1 nominal value of the debts.

Last month, WCTE announced a share-split exercise to divide its RM1 shares into two new 50 sen shares. Thus, all the share consideration related to the privatisation will be issued after the share split.

“We thought long and hard about it (the structure of the deal). We looked at the share and cash option,” said Loh.

The group decided on the share-swap settlement because it would enable WCTL shareholders to migrate to the holding company.

“WCT Land shareholders would have the opportunity to participate in WCTE, which is bigger and more liquid. This will offer them the chance to enjoy the growth in WCTE,” Loh said.

WCTE's share base will balloon to at least 889 million up to one billion from the existing 321.4 million upon completion of the share-split and privatisation exercises.

Loh said there would not be earnings dilution in WCTE after the new shares issue.

The increase in earnings contributions from WCTL as a wholly-owned subsidiary would be able to offset the impact on the enlarged share base, he added. WCTL currently generates about 20% of the group's total net profit.

For the nine months ended Sept 30, the property firm posted higher net profit of RM45.2mil versus RM31.7mil in the previous corresponding period. Revenue rose 17% to RM209.3mil from RM177.9mil previously.

According to executive director Chua Siow Leng, who spearheads the group's venture in the Middle East, WCTE had achieved an annual compounded growth rate of 20% to 30% over the years.

Chua said the group was striving to maintain the growth momentum in future.

In the third-quarter financial result announcement to Bursa Malaysia, WCTE said with its RM6.1bil order book, it was “confident of a better financial performance in the remaining of the year.”

For the nine months ended Sept 30, the group's revenue had more than doubled to RM1.95bil compared with RM784.6mil in the previous corresponding period. Its net profit expanded 67% to RM99.9mil from RM59.8mil previously.

WCTE's revenue surged above the RM1bil mark for the first time in the last financial year ended Dec 31, 2006 (FY06). Its turnover rose to RM1.4bil and net profit increased to RM115.2mil from FY05. The group derives 60% of its revenue from abroad.

Besides the works in the Persian Gulf, WCTE holds three toll road concessions in India.

The concession period for the two toll roads in West Bengal, in which WCTE has 30% stake each, stretches until 2020, while the toll collection in Andhra Pradesh, in which the group holds 21.6% stake, lasts until 2032.

Analysts concurred that the share-swap deal offered WCTL's minority shareholders a chance to participate in a bigger company and to ride on the group's growth potential, which could be good based on its past achievements.

“The intention to take WCTL private is indeed a vote of confidence on the property developer's prospects,” said an analyst.

“Although there isn't a windfall at the offer price of RM2.09 versus its last traded price of RM2.01, the deal allows you to hold shares in WCTE.”

Analysts viewed WCTE as a first-tier construction group, and no longer as a sub-contractor.

Some analysts reckoned that when WCTL came under the same management as the holding company, it might be better able to seize opportunities abroad.

As for WCTE, analysts said the privatisation would help prevent earnings leakages.

By The Star (by KATHY FONG and LAALITHA HUNT)

Property - Opportunity abounds

Positive note on mid to high-end residential property segment

We expect home buyers in the mid to high-end segment (price above RM150,000) to be able to weather cost push inflation much better than the lower residential segment.

The prospect for residential properties will depend to a great degree on the location and development profile of the area. The announcement by the Government that Foreign Investment Committee (FIC) approval is no longer required for foreigners buying property and recent exemption of the real property gains tax (RPGT) has witnessed a surge in niche development and property developers with ongoing high-end residential development projects – especially in the Kuala Lumpur City Centre (KLCC) area, Sri Hartamas (Mont Kiara), and around the Golden Triangle area.

In the first half of 2007, the high-end condominium market noted a greater take up by foreign investors in the number of units sold particularly in the KLCC area. The renewed interest in high-end residential properties by locals and foreigners has led to an upward price revision of 25% by developers since 2H06.

The relaxation of rules and the seemingly low pricing of condominiums in Kuala Lumpur compared to neighbouring Singapore have enticed more foreign investors into this segment.

Competition in the high-end segment (especially around KLCC) is expected to intensify with the completed development units up for lease. Nevertheless, management execution of property sales, buyer segmentation and the right product and marketing strategies would be important factors to determine the winners. Going forward, government expenditure on development projects is expected to surge given the utilisation of the allotted amount under 9MP has only been around 25.4% as at mid-August 2007. Since 2006, in terms of annual spending, only 90% has been used while the remainder has not been utilised. Similarly, as of August 2007, merely 33% of the allocated amount for development projects has been spent leaving a large portion available for further development.

Nevertheless, the allocation in 2008 is 2.1% lower at RM40bil, while the projected construction sector GDP is 6.3%. We expect project awards and implementation by the Government to accelerate moving forward that will smooth the path for private finance initiative (PFI) projects to lift off, hence propelling sectoral growth. The property sector can expect an upswing in the construction industry should the proposed projects including private sector and PFI projects set off concurrently.

With the launch of three new shopping malls including the Sunway Pyramid extension in September, renewed optimism in retail space is expected

Good retail prospects

On the back of Visit Malaysia Year, malls like KLCC, Mid Valley Megamall and 1-Utama have experienced good retail prospects, seeing an 8%-10% growth, since the thrice yearly “Mega Sales Carnival” to boost the country’s international profile as a shopping destination.

Retail sales trended higher to 8.2% y-o-y in 1H07 compared to the same period in 2006. Overall, retail sales grew by 8.4% in 2006, the highest in six years. The strong performance of the retail segment is mainly attributed to the steady performance of the economy, urban migration, stable employment, growing population and increasing tourist arrivals. Expansion in the retail segment will augur well for the property and real estate market preceding a healthy rental growth.

Meanwhile, tourist arrivals and tourism receipts are anticipated to increase to 20.1 million and RM44.5bil respectively in 2007 vs 2006’s 17.55 million and RM36.37bil respectively. Stronger tourism activities will translate into growth in the retail segment.

In addition, with the launch of three new shopping malls – Pavilion, The Gardens at Mid Valley and the Sunway Pyramid extension in September, we expect renewed optimism in retail space. Each mall opened with occupancy rates exceeding 90% with a total of 3.1 million sq ft of retail space. Hence, the space occupancy rate is expected to improve further to 85% in 2007 from 2006’s 79%. At the same time, capital values for shopping centres are bound to rise with more developers planning to inject shopping malls into real estate investment trusts (REITs).

By that measure also, the office market outlook remains positive. Office occupancy rates remained robust at 84.7% in 2006, vs 2005’s 84%. Full-year 2007 office occupancy rates are expected at 85%. REIT-able office space, steady rental as well as a slower rise in new office supply will see sustained momentum in 2007. A glance at the office rental outlook in the region exhibits Kuala Lumpur moving towards a firmer rental cycle, along with other cosmopolitan cities like Singapore, Seoul, Bangkok and Jakarta.

In terms of occupancy cost competitiveness comparison, Malaysia ranked 45th – the most competitive level in both a regional and global context. The Kuala Lumpur office market is robust, with increasing demand for high-end offices buoyed by the expanding services sector particularly oil & gas, information technology and financial services.

Favourable economic conditions have spurred a healthy demand for offices in prime locations and modern facilities. Currently, the average occupancy for offices in the Golden Triangle area is 91% while the Central Business District recorded a lower 80%. Meanwhile, the highest stood at 92% in Damansara Heights. With the property market poised for further growth, expect foreign investments from the likes of

Singapore, Hong Kong and Australia to invest in prime offices alongside participation in office developments around the KL city through partnerships with local developers. We expect increasing demand for high-end offices to thrust capital prices to a new level supported by sustained growth in the services sector.

The relaxation of property ownership regulations has drawn strong interest from foreign investors. As a result, property developers are raising the bar of selling prices between 5% and 100% y-o-y from the launch price to maximise values and capital gains. In 2006, high-end properties were being sold at RM1,000psf around the KLCC area. Currently, the upcoming Four Seasons is priced at RM2,000 psf, a clear sign that land prices in KL city are skyrocketing due to strong foreign investor interest. We expect property prices to widen between mass market and high-end residences given the spillover effects of petrodollar inflows and stock market wealth on property demand in Malaysia as prices are relatively cheap compared to regional properties.

The strengthening of the ringgit against the US dollar provides another impetus of growth for the property sector with further appreciation expected. Prime land prices have also been fast increasing at a pace of over 30% this year following the RPGT waiver mainly around the KLCC area. We believe the current demand for high-end properties will continue to sustain supported by the political stability of the government and healthy economic conditions in Malaysia.

The upcoming general elections would further benefit the property sector. With the liberalisation of the property sector rules benefiting the high-end property segment thus far, we anticipate further incentives by the Government to spur the low-to-medium end market.

By The Star (by Kuwait Finance House)