Further regional diversification for Glomac

Fateh Iskandar: We have to pace the launches in Malaysia. Photo by Chu Juck Seng

KUALA LUMPUR: Glomac Bhd’s group managing director Datuk Fateh Iskandar Mohamed Mansor’s years of training in the property development company has prepared him for the uphill task of navigating the firm through today’s stormy economic seas.

A backdrop of weaker consumer demand in Malaysia has prompted the developer to trim its plannned launches in the country to some RM400 milllion annually from original estimates of about RM700 million.

Hence, further geographical diversification within the region, possibly in Indonesia, is deemed pivotal to spur the growth of the company which had ventured into Australia and Thailand in recent years.

In July 2006, Glomac marked its overseas ventures via the acquisition of an office building in Lonsdale Street, Melbourne, for A$30.5 million (RM77.25 million) to boost its property investment portfolio.

Subsequently, in January 2007, Glomac announced its acquisition of a 49% stake in Thailand-based Warehouse Asia Alliance Company Ltd (WAA) for 151.9 million baht. WAA, which specialises in warehousing and logistic services in Bangkok, owns about 315,000 square metres of warehousing space.

Glomac’s investment in WAA is deemed strategic in anticipation of high capital appreciation and rental yield in view of the attractive long-term lease of warehousing space.

“We have to pace the launches (of properties in Malaysia),” said Fateh Iskandar, who also this week assumed the role of chief executive officer, taking over from his father and founding member Tan Sri Mohamed Mansor Fateh Din who remains as group executive chairman.

“Location-wise, we are looking (to see) if there are good buys,” Fateh Iskandar told reporters yesterday at a briefing on the company’s latest real estate sales promotion called Glomac 360 Showcase.

Glomac has 15 projects worth some RM3 billion in the Klang Valley, Melaka and Johor. Unbilled sales as at January 2009 stood at RM381 million which is expected to sustain earnings in the next two years.

Unbilled real estate sales refer to the value of properties sold which have yet to be recognised in the books.

“It is a slowdown (but) we hope to achieve some good sales,” Fateh Iskandar said, when asked on the developer’s latest marketing initiative, through which the firm is offering some RM400 million worth of properties for sale.

Under the latest initiative, buyers are exempted from sales and purchase agreement legal fees, and loan documentation charges. The promotion includes full loan for property purchases and easy payment scheme.

Glomac’s net profit rose 0.3% to RM9.56 million in its third quarter ended Jan 31, 2009 from RM9.53 million a year earlier, while revenue fell 5.5% to RM81.13 million from RM85.82 million, due to fewer construction jobs and lower income from its real estate projects. It proposed an interim tax-exempt gross dividend of 2.5 sen a share.

Analysts are still optimistic on the firm’s prospects. RHB Research Institute Sdn Bhd raised its earnings forecast for Glomac by 16.5% to 17% for FY09 and FY10. The estimates took into account higher operating profit margins due to weakening raw material prices and lower construction losses.

“The risks include potential cancellation of purchase agreement by buyers in the absence of funding, competition from peers, and delays in launches and approvals,” RHB Research analyst Low Yee Huap wrote in a note.

The research house rates Glomac shares a “market perform” with a fair value of 60 sen.

By The EDGE Malaysia (by Chong Jin Hun)

The ‘sell then build’ system has seen the market safely through more than one recession

It was on Feb 21 that I was delighted to discover that the Malaysian motor industry had heartily embraced the “sell then build” concept. That was the day I took the family to buy a Proton Exora.

We all eagerly anticipated the hunt for the showroom, the brochures, the test drive, the fight over the colour, the wayang over the price, the special deal on the delivery date, and the satay and bottled water that combine to make the purchase of any big ticket item the family sport it has become today.

Imagine our bitter disappointment on discovering that none of these was on the agenda. Not only that, but a whole new set of rules had been introduced.

The rather strange press ads were not a launch, sir, we were told. No, no, no, they were a soft launch. Aha. And would it be too unreasonable to request a few details, such as the size of the vehicle? Sorry, no info.

And, we asked our hapless salesman, with a sense that we might be pushing our luck, had anyone ever seen an Exora? Why yes, he beamed, every day, it could be spotted on a test run on the old road up to Genting Highlands.

The irony of that destination was not lost on us. Armed only with an ad showing the seats and a steering wheel, our salesman was remarkably on the ball when it came to the booking arrangements.

Price: RM76,000. Booking fee: RM1,000, payable now. Delivery, “after the launch.”

At this stage, I have to confess to being a little overcome with emotion. Here I was buying something the price of two low-cost houses, and treated to a marketing strategy that left the housing industry in the dust.

Those developers will just have to buck up. This is the way of the future. Imagine the possibilities of unveiling a new housing estate with a photo showing a couple of bits of plumbing and the wiring diagram.

Show house? Certainly sir, just nip up to Teluk Intan and you could well find a couple of houses quite similar.

I personally believe that it would only take a few structural changes in the Housing Developers Act to enable developers to pick up on this new marketing technique and be almost certain of not going to jail.

Don’t misunderstand me. I’m a big supporter of the “sell then build” system. It is in fact the great safety valve sitting on top of the pressure cooker that is the housing industry. It has seen the market safely through more than one recession.

To build houses without having customers in the bag would be courting disaster. This is a market where hard data is scarce and where the players are prone to periods of over-exuberance.

Building only when the product is sold can save, and has saved, an enormous quantity of potentially mis-allocated resources.

While on the subject of allocation of resources, the RM60bil stimulus package makes mention of RM1.2bil to build low- and medium-cost houses.

According to the Housing Ministry, there are still some 500,000 low-cost applicants on the waiting list.

It is possible that much of this demand is outside the Klang Valley. There are 4.2 million residential dwelling units in the whole country.

For a population of 27.7 million, that makes an average of 6.6 people per house. However, in the Klang Valley there are only 4.2 people per house, hardly what one might call overcrowding.

These statistics highlight the fantastic achievements Malaysia has made in the provision of housing. The Klang Valley has 362,000 low-cost houses, about 23% of its total housing stock. This number is increasing by over 10% annually.

About 70% of the supply of low-cost comes from the private sector. Government agencies do a good job, but I hope the private sector can be persuaded to maintain its leading role, particularly when it comes to fast-tracking several thousand new units under the stimulus package.

The idea of this being carried out solely by the state smacks of the kind of central control and brutalist architecture that made Leningrad the garden city it is today.

In fact, all this may have been on the mind of the Housing Minister recently when he mooted the idea of providing subsidies to developers as a reward for building better low-cost properties.

It’s hard to fault this clever plan to combine private sector skills and public sector resources. I hope it works out.

In addition to the construction programme, there is another heart-warming proposal to be found in the stimulus package.

This is a specific provision to give a one-year deferment of housing loan repayments to unfortunate individuals who have been retrenched.

In my line of business, I’ve witnessed the foreclosure of many low-cost properties and it’s a sad affair. It is good to see that there is a workable solution already being offered to what may become an increasing social problem this year.

I doubt that even a global recession can reduce the number of cars on our roads. I have to confess, I booked my Exora. Like most people I had a bootleg photo of the vehicle in my back pocket.

I know it’s going to be great. As my American friend remarked: “You people in Malaysia haven’t lost your faith in the future yet.” May it ever be thus.

·Christopher Boyd is Regroup Associates Sdn Bhd executive chairman. We welcome your feedback. Please write to starbiz@thestar.com.my

By The Star (by Christopher Boyd)

Mudra Tropika to launch projects in JB’s prime area

JOHOR BARU: Mudra Tropika Sdn Bhd sees RM200mil in gross development value (GDV) from its three property projects in Johor Baru.

Executive chairman Datuk Mohd Rashidi Mohd Nor said the locations of the projects in three of the most-sought-after areas in the district were the main attractions to potential buyers.


Datuk Mohd Rashidi Mohd Nor (right) and Mudra Tropika director Mohd Nzaim Sabtu with a model of the Nong Chik Heights.

The projects are sited along Jalan Sungai Chat opposite the 95-year-old English College, Nong Chik area, well known for its middle and upper-class Malay residents, and Jalan Mustapha opposite near the Mentri Besar’s official residence Saujana.

“We will launch two projects by the middle of the year – Nong Chik Riverside and Nong Chik Heights,’’ Rashidi said at the signing of a sale and purchase agreement between Mudra Tropika and Dynac Capital Sdn Bhd yesterday.

Under the agreement, Dynac Capital agreed to buy 44 of the 54 three-storey shop offices in Nong Chik Riverside from Mudra Tropika for RM43mil.

Nong Chik Riverside is an international leasehold commercial project on 6.8 acres and comprises shop offices in seven blocks.

Nong Chik Heights is a housing project on 36 acres of Malay reserve land, to be sold only to Malay buyers.

The 11.2-acre Mustapha Gardens will comprise 17 bungalows with an indicative selling price from RM1mil and they are open to international buyers.

Mudra Tropika is a company under Johor Government State Secretary Inc and all the land for the three projects belong to the state government.

“Nong Chik Riverside and Nong Chik Heights projects will keep the company busy for the next five to eight years,’’ said Rashidi.

He said the first two blocks in Nong Chik Riverside would be completed within two years of the project launch in mid-2009.

Rashidi said phase one of Nong Chik Heights, comprising 120 houses priced from RM290,000 to RM400,000 each, would also be launched in the middle of this year.

The second and final phase will offer 40 bungalows and semi-detached houses.

He added that traffic flow at the three areas would improve once all the state government offices moved to Nusajaya by the end of next month.

By The Star (by Zazali Musa)

Mudra Tropika sells 44 Nong Chik units to Dynac

JOHOR-based property developer Mudra Tropika has sold 44 units of its Nong Chik Riverside commercial project to Dynac Capital Sdn Bhd, a property investment company based in Johor Baru.



The 44 units are valued at RM43 million but it is not clear if Dynac paid that much.

Mudra Tropika executive chairman Datuk Mohd Rashidi Mohd Nor said the first phase of the project will be launched in June. However, Dynac Capital can start marketing the 44 units.

Nong Chik Riverside, an international leasehold project covering 2.75ha, comprises 54 units worth some RM60 million. The land for the three-storey buildings, located along Sungai Chat, Johor Baru, is owned by the state investment arm, State Secretary Inc.

Mohd Rashidi said Mudra Tropika has yet to decide on what to do with the remaining units.

Next on its agenda is the launch of the Mustapha Garden, a high-end housing project comprising 17 bungalows in Jalan Mustapha.

Mudra Tropika is also the first developer to build the honeycomb housing concept called the Nong Chik Heights in Jalan Kolam Air. This means houses would not have fences and they would be clustered around courtyards built on Malay reserve land.

He said it has sold 60 per cent of the 120 units of the houses under phase one of the Nong Chik Heights. He is confident the project will do well because of its novelty, location and pricing of between RM290,000 and over RM400,000.

By Business Times (by Chuah Bee Kim)

Boustead wins RM18.87m contract

BOUSTEAD Holdings Bhd’s unit Boustead Building Material Sdn Bhd has won an RM18.87 million contract to construct and complete earthworks, piling and sub-structure works of a four-star hotel in Mutiara Damansara.

The contract, from Boustead Hotels and Resorts Sdn Bhd, for the 12-storey hotel that has 301 rooms, will be funded with bank loans, internal funds or a combination of both.

This will be the Boustead group’s second hotel in Mutiara Damansara after Royale Bintang Damansara.

By Business Times