Mixed reaction to PNB offer to acquire property developer SP Setia

PETALING JAYA: Research analysts are divided on whether investors should cash out on Permodalan Nasional Bhd's (PNB) offer to acquire property developer SP Setia Bhd's shares at RM3.90 per share and 91 sen per warrant.

Some analysts advised investors to accept the offer, which represents a premium of 11.4% for the ordinary shares and 97.8% for the warrants compared with the closing prices on Tuesday, while others said investors should adopt a “wait and see” attitude in view of the possibility of a higher offer price or counter-bid situation.

For several years PNB, together with its units, has been SP Setia's largest single shareholder with just under a 33% stake, the trigger point under the takeover code.

It passed the trigger point on Tuesday with additional market purchases.

Other major shareholders of SP Setia include the Employees Provident Fund with 13.4%, and SP Setia president and CEO Tan Sri Liew Kee Sin with 11.26%.

Analysts from ECM Libra Investment Research and OSK Research advised investors to accept the PNB offer.

ECM Libra Investment research head Bernard Ching said in a note that the offer was viewed as fair and attractive since it valued SP Setia at up-cycle valuations when the current market condition is on a downtrend.

“The offer price is also almost at parity to full intrinsic value based on our revised net asset value (RNAV) of RM3.98.”

Ching pointed out that the property sector might enter a cyclical downturn due to a weakening economic outlook, deteriorating housing affordability and policy risks.

OSK Research also opined that PNB's offer price was a decent exit strategy for investors.

“The offer of RM3.90 per share translates to 2.25x FY12 (financial year 2012) price-to-book-value which is slightly above SP Setia's five-year historical average price-to-book-value of 2.22x. The offer price also translates to 23.1x price-to-earnings ratio (PER) on FY12 earnings per share which was above the consensus FY12 PER of 18.04x as well as above SP Setia's five-year historical PER of 19.28x,” said OSK Research.

However, Hong Leong Investment Bank analyst Sean Lim said long-term investors who believe in the intrinsic value of SP Setia should not accept the offer.

“We agree with SP Setia's board that the offer price significantly undervalues the company as it is at 15% discount to our RNAV estimate of RM4.58, and appears unattractive versus the street's target price range of RM4.12 to RM5.41,” said Lim.

Lim added that there was a good chance of a better offer price materialising for SP Setia.

HwangDBS Vickers Research analyst Yee Mei Hui said PNB's offer was taking advantage of current weak market sentiments as it valued SP Setia at a 24% discount to RNAV of RM5.11.

“Also, the 11% premium over the last traded price offer is lower than 14% to 31% range seen for previous privatisation or mergers and acquisitions in the Malaysian property sector.”

A major concern was whether Liew and his management team would remain in the event of a successful takeover bid by PNB.

Kenanga Research said the company's fundamental value and branding would diminish considerably if SP Setia's current leadership and team exit.

“The key selling point of SP Setia has always been its management team and ability to turn around non-prime landbank into flourishing property development,” said Kenanga Research.

CIMB Research said the best-case scenario was for Liew to continue to run the company and PNB to go into joint ventures or inject property landbank into SP Setia at arm's length prices.

“This would give SP Setia access to PNB's vast landbank and open up other opportunities to the company.”

CIMB Research added that the worst-case scenario was Liew selling his entire stake.

SP Setia's shares and warrants were among the top gainers and most actively traded yesterday.

Its share price closed 37 sen higher to RM3.87 while SP Setia-CC was up 6 sen to 7.5 sen, SP Setia-CD rose 5 sen to 7 sen and SP Setia-WB jumped 33 sen to 79 sen.

By The Star

PNB buys 23.5m SP Setia shares in open mart

Permodalan Nasional Bhd (PNB), which has made an mandatory general offer to take over property developer, SP Setia Bhd, is accumulating the shares in the open market.

In a filing to Bursa Malaysia, SP Setia said PNB has bought 23.5 million shares in the open market at RM3.868 a share, about four sen below the RM3.90 price PNB offered for the remaining shares that it did not own.

PNB, as of yesterday owned 33.17 per cent stake in SP Setia, which triggered the mandatory general offer.

SP Setia founder, Tan Sri Liew Kee Sin, has 11.26 per cent stake and SP Setia foreign shareholding now stood at 21 per cent.

At 12.30pm, SP Setia shares were up one sen to RM3.88.

By Bernama

PNB says it’s confident of SP Setia’s management team

KUALA LUMPUR: PermodalanNasional Bhd (PNB) wants to work with the current management of property developer SP Setia Bhd, andcontinue to deliver value to shareholders.


Hamad: ‘We also have the responsibility to continuously seek long term value for our unit holders.’

In a statement, PNB said it hadconfidence in SP Setia's existingmanagement team and reiterated that, as stated in the notice of takeover, it had every intention of retaining the listed status of the company.

“This is a synergistic collaboration that blends the entrepreneurial spirit of SP Setia and PNB's record as a strong and supportive long-term shareholder, which allows the management to have an undivided focus on maximising shareholders' value,” said PNB president and group chief executive Tan Sri Hamad Kama Piah Che Othman.

On Wednesday, PNB offered to acquire SP Setia shares at RM3.90 each and 91 sen per warrant.

The takeover bid by PNB caught the SP Setia board unawares and spread concern through its senior management.

The SP Setia board had responded by saying it was seeking competitive bids because the PNB offer undervalued the company based on external valuations by investment analysts published before the receipt of the offer.

The SP Setia board would also ask PNB to revise its offer upwards.

However, Hamad Kama Piah said the offer price of RM3.90 per share was fair and reasonable.

“We have considered this offer from various angles, such as market conditions amid the interest of all stakeholders especially minority shareholders.

“We also have the responsibility to continuously seek long-term value for our unit holders.”

The statement pointed out that SP Setia fitted into PNB's investment criteria as the group was continuously looking for well-run and fundamentally strong companies, given the substantial funds under its management.

Hamad added that the offer was in line with PNB's long-term strategy of enhancing its investments in the property sector.

“We are confident of the prospects of the sector in Malaysia. Having a strategic holding in SP Setia would further strengthen our portfolio, which already has a strong presence in the banking, plantation and automotive sectors, among others,” he said.

By The Star

Axis upbeat on Penang land

PETALING JAYA: Axis REIT Managers Bhd's recent acquisition of real estate in Seberang Prai will give it a gross yield of 11% and a net yield of 10.2%, said chief executive officer and executive director Stewart LaBrooy.

He said while Axis gearing levels would rise to 39% after this deal, they would come down to 26% by year-end when the company's proposed placement of 75.1 million units was completed. This will help the company raise RM180mil.

“We are bullish about Penang now and will be making more investments in the north,” he said, noting that the rapid industrial development in Penang was a draw for the REIT.

Axis is paying RM59mil for a logistics industrial building facility built on two parcels of adjoining industrial land in Bukit Tengah Industrial Park. They have leasehold titles that expire in 2052 and 2068.

LaBrooy said the purchase price of RM59mil was a net gain as the total market value of the property was RM62mil according to independent valuer CB Richard Ellis.

For the facility, the REIT will inherit the tenancy of Schenker Logistics (M) Sdn Bhd, a global logistics service provider. The tenancy which expires in mid-2014, will generate RM573,076 in monthly rentals or RM6.88mil in gross annual income.

The 408,250-sq-ft property is the fourth investment in the north and the 28th property secured by Axis which invests mainly in Penang, the Klang Valley and Johor. It will increase the REIT's asset under management to over RM1.33bil.

Analysts have said the acquisition is no surprise because the company has aimed to increase its total investment properties to RM1.5bil by year-end from its current RM1.25bil.

On its stock price, an analyst from RHB Research said that Axis was doing better than other REITs.

“We are still positive on the stock. Even near 40%, its gearing ratio is still considered manageable and the company will pare down its debt with the planned placement,” he said.

He added that while the market had been affected by the recent economic turmoil, Axis had been “fairly resilient and its valuation was still supported by strong yields, which have historically remained between 7% and 10%”.

Axis shares closed at RM2.35 yesterday, 1 sen lower from Wednesday.

HwangDBS Vickers Research said that if Axis completed its acquisition by October, it would enjoy a RM1.7mil gross revenue this financial year (FY11) and RM6.9mil in FY12 from the property.

By The Star

PNB defends bid for SP Setia

PNB says it has considered the offer from various angles, such as market conditions, the interest of stakeholders especially the minority shareholders.

Kuala Lumpur: Permodalan Nasional Bhd (PNB) has defended its offer price for SP Setia Bhd and extended an olive branch to the board, which is resisting its bid to control the property firm.

The state-run fund manager offered RM3.90 a share and 91 sen for its warrants but the board, which includes president and chief executive Tan Sri Liew Kee Sin, said the bid fundamentally undervalues SP Setia.

PNB president and group chief executive officer Tan Sri Hamad Kama Piah Che Othman said many analysts had viewed the offer positively as it translates into a price earnings ratio of 19.8 times compared with Kuala Lumpur Property Index's 9.8 times.

"We have considered this offer from various angles, such as market conditions, the interest of stakeholders especially the minority shareholders," he said in a statement released here yesterday.

The statement explained the rationale for PNB's strong interest in the company which it regarded as a strong and well-run group with stellar performance.

SP Setia, it said, has continued to be one of the most profitable property players and is highly regarded by the investment community.

The market also views the company as having good returns po-tential, both in terms of dividend and capital gains and has outperformed the returns of the FTSE Bursa Malaysia KLCI in the past five years.

"The offer is in line with PNB's long-term strategy of enhancing its investments in the property sector ... having a strategic holding in SP Setia would further strengthen our portfolio," said Hamad Kama Piah.

He also expressed his confidence in the existing management team and PNB's wish is to work with them to continue to deliver value to shareholders.

"This is a synergistic collaboration that blends the entrepreneurial spirit of SP Setia and PNB's record as a strong and supportive long-term shareholder, which allows the management to have an undivided focus on maximising shareholders' value," he said.

PNB has been a long-term shareholder in SP Setia since 2000 and has been gradually increasing its stake to being the single largest shareholder since 2008.

Analysts have mixed views on the fair value of SP Setia, which ranges from a low of RM3.15 to a high of RM5.41.

They also don't think a rival bidder will emerge although SP Setia's board plans to look for one.

TA Securities senior property analyst Tan Kam Meng said in terms of financial muscle, only other government-linked funds will be able to compete with PNB.

"However, it makes no sense for these funds to bid since PNB has already controlled the 33 per cent stake," he said.

He added that should there be competing offers, based on SP Setia's current market value of RM6.9 billion, it would have to come from a group of investors.

"The premium offered by PNB is below our discounted free cash flow valuation of RM4.45 per share," he said.

Another analyst also said there is still a possibility of PNB raising its offer as plans to keep SP Setia listed is a recognition of its equity brand.

"PNB has the money and it is very doubtful it would allow others to outbid it," the analyst said, adding that with most analysts in favour of SP Setia's refusal to accept the offer, PNB may just relent.

Nomura research analysts Jacinda Loh and Raashi Gupta in their notes yesterday said if there is a competing party, it has to have solid enough financial backing and there is possibility it would end up not having full control.

"There are chances of a management buyout," they said.

On the chances of other major property players coming in to take over SP Setia, most analysts said it is very unlikely, given the current unfavourable economic condition.

"For a group as big as SP Setia, there is just too much cost involved," they said.

Tan said if PNB raises its offer and Liew accepts and leaves, it would be a disastrous turn of event unless PNB can find a replacement who is equally strong.

By Business Times

The Liew factor in SP Setia

KUALA LUMPUR: Tan Sri Liew Kee Sin will be a major force in deciding whether or not SP Setia Bhd accepts the offer made by Permodalan Nasional Bhd (PNB), analysts said.

And the view is Liew, who helped to build SP Setia, is likely to stay on with the company even if PNB's offer is accepted.



"His (Liew's) decision will sway whether other investors will take up the offer," Jupiter Securities head of research Pong Teng Siew said.

On Wednesday, PNB offered to gain control of the property company for RM3.90 a share and 91 sen per warrant. It also wants to keep SP Setia listed.

But this was rejected by SP Setia's board on the same day, saying the offer "fundamentally undervalues" the property developer and that it will seek rival bidders.

As the one who built the company, it is unlikely that Liew will leave SP Setia, because of sentimental reasons and the fact that no one wants him to leave.

"Since PNB wants to maintain SP Setia's listing status, Liew's stake is also protected, compared to if the company was not listed. This is his business," another analyst said.

Last night, PNB expressed its confidence in the existing management team and its intention to continue to work with them to deliver value to shareholders.

PNB now has 33.17 per cent of SP Setia, Liew holds another 11.26 per cent and SP Setia's foreign shareholding is some 21 per cent.

Meanwhile, Pong opined that it was unlikely that a management buyout could happen.

"Given the sheer size of the company, I doubt that there is anyone who can outdo the offer," Pong said.

By Business Times

High noon at E&O AGM?

It is unclear why ECM Libra Financial Group, which first became a substantial shareholder in April, wants to have representatives on the board.

Kuala Lumpur: What happens at Eastern & Oriental Bhd (E&O)'s annual general meeting today is likely to show investors where major shareholders stand on a surprise request to add new directors to the board.

ECM Libra Financial Group Bhd, an investment bank with 6.42 per cent of E&O, has nominated lawyers Mahadzir Azizan and Leong Kam Weng to be directors of the property firm.

It is unclear why ECM, which first became a substantial shareholder in April, wants to have representatives on the board.

It is also thought that authorities are not keen on investment banks to have property businesses, which is one reason why others like OSK Holdings Bhd have split that business away while TA Enterprise Bhd have not pursued investment banking to keep its property operations, analysts said.

ECM's nominations also comes after Sime Darby Bhd has completed buying 30 per cent of E&O for RM2.30 a share, a big premium to the market price. The sellers were E&O managing director Datuk Terry Tham Ka Hon, GK Goh Holdings Ltd and Tan Sri Wan Azmi Wan Hamzah.

Minority shareholders are reportedly unhappy a general offer was not extended to all. Sime Darby has defended the deal, saying it may do so in the future.

That deal as well as other stock purchases by company insiders before Sime Darby's entry are now being investigated by the Securities Commission.

"After 17 days, minority shareholders still don't know what the outcome of the investigation by the SC is, and why it is taking so long for the investigation to complete," said an analyst, who expects minorities to be very vocal at the AGM.

At the meeting, four directors of E&O are seeking re-election. They are Tham, Datuk Azizan Abd Rahman, Vijeyaratnam V. Thamotharam Pillay and Datuk Henry Chin Poy Wu.

E&O shares rose six sen to close at RM1.49 yesterday.

By Business Times

CapitaMalls Asia says HK shares to trade on Oct 18

HONG KONG: Singapore-based shopping mall developer CapitaMalls Asia said on Friday its secondary listing in Hong Kong would begin trade on Oct 18.

No new shares will be issued as a result of the Hong Kong listing, it said in a filing to the Hong Kong bourse.

The company, a unit of property developer CapitaLand, first said in March it would seek the secondary listing to bolster its expansion plans in China.

By Reuters

PNB launches takeover of S P Setia

KUALA LUMPUR: S P Setia Bhd, the country’s second largest property firm by market capitalisation, is the latest to be swept off the private property sector with the takeover offer by its parent Permodalan Nasional Bhd (PNB).

It is the second transaction in the real estate industry related to PNB, after Sime Darby Bhd’s proposed acquisition of 30% stake in Penang-based Eastern & Oriental Bhd just last month. PNB owns 48.1% in Sime.

Trading in S P Setia shares was suspended yesterday to facilitate the exercise, but the stock rallied nearly 13% or 40 sen to RM3.50 on heavy trading just the day before, ahead of the news. The exercise confirmed an exclusive front-page report in The Edge Financial Daily yesterday.

In a notice yesterday, PNB extended a conditional takeover to acquire for cash all S P Setia shares at RM3.90 per share and warrants at 91 sen per unit.

Meanwhile, in response, S P Setia said it will invite counter bids from other parties as it views the offer by PNB “fundamentally undervalues” the developer.

“The board has met to consider the offer and is of the view, based on external valuations of the company by investment analysts published before receipt of the offer, that the offer fundamentally undervalues the company”, it said in a statement to Bursa Malaysia.

“The board will also be writing to the offeror to enquire whether they are interested in revising the offer price upwards to reflect a price which is closer to the fair value of S P Setia,” it added.

The company said the decisions were taken at an emergency board meeting convened yesterday with the unanimous vote of all board members present save for Tan Sri Wan Mohd Zahid Mohd Noordin who is an interested director.

It said Wan Mohd Zahid and Datuk Noor Farida Mohd Ariffin, both deemed connected to the offeror, will abstain from deliberating and voting at all the relevant board meetings in relation to the offer.

S P Setia plans to appoint an independent adviser in relation to the offer, and advised shareholders not to take any action until receipt of the independent advice circular.

The offer is conditional upon PNB receiving more than 50% of the voting shares of S P Setia. It currently has a 33.17% stake in the property developer. It was launched after PNB and parties acting in concert acquired a total of 3.07 million shares from the open market on Tuesday at prices ranging from RM3.16 to RM3.50 per share. This raised their stake from 32.99% to 33.17%, triggering the general offer.

The purchases accounted for 41% of that day’s trading volume of 7.4 million shares.

PNB can easily achieve the threshold if the Employees Provident Fund, which controls a 13.42% stake and Kumpulan Wang Persaraan (KWAP) which holds 5%, accept the offer, as it would end up with 51.59%.

This could also mean that PNB may not even need the nod of other shareholders, including that of Tan Sri Liew Kee Sin’s. Liew owns 11.26% of S P Setia.

As at Aug 31, before the recent market sell-off, S P Setia had a foreign shareholding of 21%. With the exit of foreign investors and uncertainties over the company’s future leadership and management direction, analysts say many of them could be inclined to accept PNB’s offer.

If the proposal goes through, this could effectively turn S P Setia, an epitome of successful entrepreneurial drive, to a government-linked entity.

While PNB intends to keep S P Setia listed post-takeover, the big question remains: will Liew exit and will its management be revamped?
Liew has declined to give a statement on the matter.

A MIDF property analyst said this is a concern given S P Setia’s reputation today is owed to the current management of the company.

“Investors’ decision (on whether to hold onto S P Setia shares) will very much depend on whether or not the management will be the current guys.

“Because if you look at S P Setia’s current products like Setia Alam and its landbank; they need that kind of management to achieve such a reputation that was built over years and years,” he said.

Affin Investment Bank property analyst Isaac Chow said although the offer price translates into a marginal premium to S P Setia’s estimated real net asset value of RM4, it can present a good opportunity for investors to cash out against a dismal market outlook.

“We are just curious on the future plans and direction of the company,” he added.

The proposal follows PNB and parties-in-concert’s acquisition. The offer price is at a premium of 11.4% to S P Setia’s closing price of RM3.50 on Tuesday, a 21% premium to the five-day volume weighted average price (VWAP) and a 15% premium to the one-month VWAP of S P Setia shares.

The offer price for the warrants translates into a premium of about 98% to Tuesday’s closing price and 116% to the five-day VWAP.

With net assets per share of RM1.81 as at July 31, the RM3.90 offer translates to a price-to-book ratio of 2.15 times.

For the nine months to July 31, S P Setia chalked up net profit of RM245.5 million, or 14.6 sen per share, on the back of RM1.6 billion in revenue.

PNB is no stranger to the real estate scene given its holdings in both listed and unlisted entities. S P Setia is possibly its biggest investment in the sector so far.

The few PNB listed property firms that have been de-listed include Island & Peninsular Bhd, Austral Enterprises Bhd and Pelangi Bhd.

In the event PNB plans to consolidate its property firms, including S P Setia, the merged entity can possibly become the country’s largest property group by market capitalisation.

S P Setia will be the latest to join the foray of acquisitions led by the government-linked companies in private property sector.

Last year, government-linked UEM Land Bhd acquired Sunrise Bhd to create the country’s largest property development company by market capitalisation.

By comparison, Sunrise, which was acquired at RM2.80 plus a 20 sen dividend to shareholders, was priced at 1.32 times its net assets per share of RM2.28 as at Sept 30, 2010, before the takeover was announced.

By The EDGE Malaysia

Entrepreneurial-driven property firms waning

Permodalan Nasional Bhd’s (PNB) proposed takeover of S P Setia Bhd has raised eyebrows and potentially marks the ebb of entrepreneurial-driven property firms.

S P Setia has come a long way since its founding in 1974 and it was not always smooth sailing for its captain Tan Sri Liew Kee Sin.


Leong still the majority owner of Mah Sing with a 35.2% stake.

Liew received flak when the company bought a large 3,900-acre (1,560ha) track of land in Shah Alam, bordering Klang, from See Hoy Chan Group in 2002.

However, he proved sceptics wrong when he turned that land into two award-winning townships — Setia Eco Park and Setia Alam. Liew had instantly turned the brand into priceless goodwill. In the process, he also lifted prices of neighbouring townships in Klang.

S P Setia helped spurt the NKVE-Setia Alam Link, which was followed by many more highway linkages, and scores of developers that have followed suit with planned community living concepts. For these and many other reasons, Liew is viewed not only as a prolific business figure, but an important contributor to the real estate community.

Now the table has turned on Liew, who was apparently caught off guard with PNB’s takeover move.

With the proposed takeover of S P Setia by PNB, it is uncertain whether Liew will be given a free hand to run the company.

One possible outcome is probably best summed up by a fund manager who said: “When PNB takes over, Liew is not the boss anymore. If I were Liew, I will cash out and build a business elsewhere.”

The fund manager added the takeover by PNB is not entirely a surprise given that the fund has been accumulating and holding the shares for a few years now.

He also noted that Liew made himself vulnerable to a buyout when he sold down his shareholding to the 11.26% level currently.

Indeed, the collective shareholding of government-linked and provident funds came up to about 47% prior to the takeover offer, but perhaps no one then batted an eyelid largely because the shareholdings were very fragmented.

PNB now needs to meet an acceptance level of 50% to push through its takeover proposal, and this could be achieved effortlessly if the Employees Provident Fund (EPF), which controls a 13.42% stake, and Kumpulan Wang Persaraan which holds another 5% accept the offer.

It is interesting to note in the event PNB consolidates its property firms, including S P Setia, the merged entity can possibly become the country’s largest property group by market capitalisation.

But in this case, bigger doesn’t always mean better, especially if S P Setia is run as a typical inhibited, bureaucratic and lowly empowered government-linked company.

This is the reason why some quarters are against the government’s takeover of entrepreneurial-driven firms like S P Setia.

While the government is seen as becoming a dominant player in the private property sector, it is also privatising its own parcels of land in strategic areas.

This include a 62.5-acre prime land in Mont’Kiara, which its swapped with the controversial RM628 million trade centre, the 495-acre Sungai Besi land and the 3,300-acre Rubber Research Institute land in Sungai Buloh.

That said, it is puzzling to see the government releasing more of its land to the private sector, just to see it taking over these companies that would benefit from the projects.

In Hong Kong or Singapore, the government’s role in property sector is to ensure steady release of land to avoid excessive speculation and ensure the availability of affordable housing for its citizens.

However, the government’s objective in buying into private developers here is unclear.

Some are of the view that the government here could be functioning as a ‘last resort’ buyer, especially since there has been little foreign merger and acquisition (M&A) interest in the local property sector.

There are those who argue that it is the attractive valuations of property firms here that make them a target for local funds who want to enhance returns.

Given that most of the private developers now have a major government-related shareholder, some speculate that government-linked companies (GLC) or funds have yet to hit the brakes on its acquisition drive just yet.

At Mah Sing Group Bhd, for instance, Koperasi Permodalan Felda Malaysia Bhd, PNB, EPF, Kumpulan Wang Persaraan and Valuecap Sdn Bhd collectively own a 20.8% stake.

However, it may be a difficult task to take over Mah Sing, which raised its profile after it landed the priced Pekeliling land rejuvenation project, as its managing director Tan Sri Leong Hoy Kum is still the majority owner with a 35.2% stake.

Another potential M&A target is IJM Land Bhd, owned by IJM Corp Bhd, which also has a large government-linked shareholder. This especially after the merger with Malaysian Resources Corporation Bhd (MRCB) fell through last year. It was speculated that it failed because neither could decide on who will lead the merged entity.

In fact, part of the rationale for MRCB-IJM Land merger was to give the merged entity an edge in developing the Rubber Research Institute land.

Late last year also saw the takeover of Sunrise Bhd by UEM Land Holdings Bhd, controlled by Khazanah Nasional Bhd. Sunrise was helmed by Datuk Tong Kooi Ong.

While there are many questions left unanswered in the government’s ultimate property game plan, it certainly looks like entrepreneurial-driven property firms here are on the wane.

By The EDGE Malaysia

Glomac keen to go into land privatisation

Property developer, Glomac Bhd, is keen to participate in government land privatisation and aggressively looking for landbanks especially within the Greater KL area.

Group managing director and chief executive officer Datuk FD Iskandar FD
Mansor said Glomac would like to participate if they were given a change, adding that the company is already looking at some parcels (of land).

"We are actively looking for landbanks especially in Greater KL area. We
have a good position and we sit on a sizeable warcrest of about RM370 million," he told reporters after Glomac's annual general meeting today. Glomac currently has 400-hectare landbank.

Iskandar said Glomac was also prepared to look at the opportunities (land
acquisitions) in the event if the market took a turn for the worse, adding that
the opportunities in the property business in Malaysia are still ample.

He said Glomac planned to launch properties worth between RM1.2 billion and
RM1.3 billion in gross development value (GDV) for the current financial year
ending April 2012.

Among the projects are Glomac Damansara, townships in Rawang, Sungai Buloh and Johor Baharu, Glomac Cyberjaya 2 and Mutiara Damansara Residences.

Glomac sold RM418 million worth of properties in financial year 2011 and
achieved some RM100 million worth of sales in the first quarter of financial
year 2012.

Iskandar said sales trend could slow down due to external factors like US
and Europe financial crises. However, demand is still there as strong take-up rate was seen in Glomac's properties.

"Not like 97/98 (Asian financial) crisis...even banks were affected. Today,
banks are so liquid and in strong position. Is just a confidence factor...people
are opting a "wait and see" attitude," he said.

On Glomac's commercial properties, Iskandar said the company was looking at
a possibility of en bloc sales, adding that Glomac was finalising some
agreements and hope to make an annoucement before year-end.

"There is demand for commercial properties. More multinational corporations
are moving out from the central business district to Petaling Jaya, Damansara
and Kelana Jaya," he added.

By Bernama

SP Setia gets takeover offer from Permodalan

SP Setia Bhd, Malaysia’s biggest listed developer by sales, said shareholder Permodalan Nasional Bhd made an offer to take over the company in the country’s largest property acquisition in at least two decades.

Permodalan or PNB, Malaysia’s largest state asset manager, offered RM3.90 apiece for the rest of the shares it doesn’t already own, Maybank Investment Bank Bhd said in an e-mailed statement today.

The all-cash bid values SP Setia at RM6.9 billion. The stock surged 13 per cent to RM3.50 yesterday, the most since 1998, before being suspended from trading today. The offer represents a premium of 21.5 per cent above SP Setia’s five-day volume-weighted average price of RM3.21, said Maybank, which is acting for PNB.

This compares with an average premium of 34 per cent for 17 property deals of more than US$500 million in Southeast Asia in the past five years, according to data compiled by Bloomberg. “If it’s privatized, it would imply that Permodalan might do some internal consolidation and put all their property assets under one entity,” said Jason Chong, who helps manage about US$1 billion as chief investment officer at Manulife Asset Management (Malaysia) Sdn Bhd in Kuala Lumpur.

They also need to “ensure that core management is still around.” The offer follows PNB’s 2009 merger of three developers after buying them out. Kuala Lumpur-based SP Setia will give PNB, which manages about RM150 billion of assets, access to projects in Malaysia, Australia and Vietnam.

By Bloomberg

Sunreit takes possession of Putra Place

KUALA LUMPUR: Sunway Real Estate Investment Trusts (Sunreit) has finally taken complete physical possession of Putra Place, six months after it winning the bid for the building at an auction.

Sunreit was unable to move in as the previous owner of the assets, Metroplex Holdings Sdn Bhd took legal action to nulify the auction.

Sunreit Management Sdn Bhd's chief executive officer Datuk Jeffrey Ng when contacted by Business Times this morning said there are three parts to the assets.

"We took possession of the office building and mall last night after the court ruling which declared us as the rightful owner and we took possession of the hotel this morning," he said.

Ng added that the most important thing now is the hard work that will go into planned major refurbishment to enhance the property.

An estimated RM100 million to RM200 million will be spent on the asset that was bought for RM513.95 million.

By Business Times

Axis REIT to acquire land in Seberang Perai

PETALING JAYA: Axis Real Estate Investment Trust (REIT) has entered into an agreement with Apex Properties Sdn Bhd to acquire single-storey warehouses on leasehold land in Seberang Perai, Penang for RM59 million.

The REIT's manager said in an announcement to the stock exchange that this was part of the REIT's diversification strategy that would benefit from economies of scale.

By The Star

House prices to rise, costlier materials blamed

KUALA LUMPUR: Property developers will be forced to raise prices of residential properties by as much as 20 per cent due to rising cost of building materials

The Real Estate and Housing Developers' Association Malaysia (Rehda), however, does not think this will lead to a property glut.

"In Malaysia, there are very few investment portfolios that one can hold. Besides stocks and bonds, the other alternative is property and one can never go wrong on that," Rehda president Datuk Michael Yam Kong Choy claimed.

Rehda is optimistic that property prices will pick up in the second half of this year and 2012, given the positive outlook of the Malaysian economy.

Yam said the property sector has a direct correlation to the economic condition as demand for properties increases during a booming economy.

"Unless there is a serious financial crisis, I see steady uptake in properties," he told reporters after Rehda's first half 2011 property update yesterday.

On building materials cost, Yam said prices of items, such as bricks, steel, cement and sand, which are major construction components, have increased to 89 per cent from 32 per cent within eight years.

Yam said developers these days can only afford a net margin of about 5 per cent to 10 per cent because of high cost of building materials.

"Look at SP Setia Bhd, one of the biggest developers in Malaysia with a market capitalisation of nearly RM7 billion, but made only around RM250 million in net profit last year. There are other businesses which make much more than property developers," Yam said.

The high cost of building materials and land prices and the shortage of labour will continue to be the main challenges faced by property developers in Malaysia, he added.

On the trend moving forward, Yam said popularity of properties in the vicinity of transport modes will be more desirable and those looking for landed properties would be more willing to move further out from city centre areas.

In the last 12 months, companies such as SP Setia and UEM Land Holdings Bhd have been buying land in Ulu Langat, Selangor, in anticipation of demand for properties in the area.

By Business Times (by Sharen Kaur)

Rehda finds hope in housing market outlook despite negatives

KUALA LUMPUR: The Real Estate and Housing Developers' Association Malaysia (Rehda) is “cautiously optimistic” of the housing market outlook in the first half of next year despite a marked increase in building material and labour costs as well as a slowdown in economic activity.


Yam: ‘We appeal to the Government not to tinker too much with regulations concerning the industry as this will cause more uncertainty.’

A Rehda survey found that 41% of the developers who responded were optimistic of the first six months of 2012 compared with the second half of this year, where 48% said they were optimistic.

Most respondents in the survey said prices would likely rise by up to 20% in the second half of this year, with 47% of respondents planning to increase selling prices by at least 15%. The survey showed that launches in the period were equally split between strata-titled and landed properties.

Speakers at the Rehda update on the property market for the first half of the year said a number of factors, including government policies and the overall volatility of global capital markets, made developers cautious of the outlook.

The briefing also included the participation of RAM Holdings Bhd group chief economist Yeah Kim Leng, who gave an overall view of the global and local economies.

Rehda president Datuk Seri Michael Yam said the industry was concerned about how the local economy would be affected by external forces including the pressure on the sovereign debt ratings of Malaysia's developed market trading partners.

He said there were also concerns about the proposal to assess housing loans based on net income rather than gross income.

“We appeal to the Government not to tinker too much with regulations concerning the industry as this will cause more uncertainty,” Yam said.

Rehda KL chairman N.K. Tong said the more cautious outlook could be due to the timing as developers could not tell that far ahead how the property market would be performing.

“There's more uncertainty, so the respondents are not as optimistic compared with the second half of 2011, with the percentage of those who responded they were neutral on the outlook for the first half of 2012 rising to 39%,” he said.

Yam said that based on the survey findings, property launches of the second half of the year so far remained “business as usual” compared with the first half of the year where launches continued to be healthy with encouraging demand.

“Property prices have been rising partly due to the roll-out of Economic Transformation Programme projects,” he said, adding that the costs of building materials and labour continued to be major challenges for the industry.

Yam said although the 70% loan-to-value ratio for a third residential property purchase had had minimal impact, it was now taking from nine to 12 months to sell up to 70% of launched properties compared with before the imposition of the ruling.

Meanwhile, Yeah said that despite the evidence of weaker forward economic indicators, the economy was facing a slowdown and not a recession.

“However, this is on a baseline assumption that there will be no synchronised slowdown in the developed economies. If only one or two regions face a slowdown then the local economy will be able to sustain growth at the lower end of the Government's 5%-6% target,” he said.

Yeah said there would likely be more volatile fluctuations in the commodities and capital markets. “It will be prudent to factor into corporate planning that growth in the developed economies will be slow in the next three to five years while Asian economies will still be growing although growth have been revised downwards,” he added.

Yeah said that while banks had not tightened sufficiently in lending, there were expectations that they would be more selective going forward. “A few indicators suggest that we're still relatively resilient in terms of consumption with non-residential loans still very strong,” he said.

Yeah said rising household debt levels remained a concern as it could expose households to further shocks and systemic problems.

By The Star

ETP projects to spur expatriate demand for high-end homes

KUALA LUMPUR: The Economic Transformation Programme (ETP) is expected to drive foreign direct investments (FDI) that would in turn spur expatriate demand for high-end houses.

The Real Estate and Housing Developers' Association Malaysia (Rehda) president Datuk Seri Michael Yam Kong Choy said expats now account for 4 per cent of the total housing stock of four million in Malaysia.

"While the figure looks small, it has been growing in the past few years. We are not an investment destination for foreigners, but we have been able to attract large groups from Europe and Asia Pacific," Yam said yesterday.

Yam said the ETP projects and the Greater Kuala Lumpur/Klang Valley development plan will raise Malaysia's profile.

"Hopefully the government will roll out ETP projects quickly, so that more expats will come in and buy the high-end properties. This will augur well for the property market and the economy," he said.

Meanwhile, RAM Holdings Bhd chief economist Dr Yeah Kim Leng said there is a need for a bold policy to stimulate private investment as there were complaints about the restrictive business operating environment.

He said that investment, though below expectation in the first half of 2011, is expected to increase in the second half of the year and in 2012 as a result of more focused efforts by the government.

"We expect monetary tightening to continue at a gradual pace despite easing consumer and asset price pressures, particularly for several property segments in selected locations and surplus liquidity in the financial system.

"Selective macro-prudential measures targeted at averting the build-up of credit and asset bubbles would continue at a prudent pace," Yeah said.

Yeah added that further tightening measures may be kept on hold for the rest of the year to brace for global uncertainties.

By Business Times (by Sharen Kaur)

BRDB doing the right thing by calling for open tender for assets sale

KUDOS should be given to Bandar Raya Developments Bhd (BRDB) for taking heed and acting on concerns raised by analysts, the media and the Minority Shareholder Watchdog Group.

Its board has decided to withdraw the proposal to sell its prized assets to its major shareholder and has instead opted for an open tender exercise.

That's exactly what some quarters had been calling for. And that seems to be what BRDB is delivering.

It has also called on Ambang Sehati Sdn Bhd, the investment vehicle of BRDB chairman Datuk Mohamed Moiz Jabir Mohamed Ali Moiz, which had proposed to buy the assets, to take part in that tender exercise.

Ambang Sehati owns 18.88% in BRDB.

It will be interesting to see if there will be bids that top the RM914mil price tag that had been offered by Ambang Sehati for BRDB's Bangsar Shopping Centre, Menara BRDB, the CapSquare Retail Centre and the Permas Jusco Mall.

If there are no bids that match what Ambang Sehati has offered, then it may seem like there was much ado about nothing.

But if bids exceeded what was offered, then minority shareholders can rest assured that their company's board has done the right thing.

BRDB's board has also given the assurance that an independent international property valuation firm will be appointed to manage the tender exercise.

True, the question still arises as to why BRDB didn't have an open tender exercise for its assets in the first place.

But some credit should be due to BRDB for ultimately making the right decision.

What is still troubling in BRDB's case is the uncertainty surrounding the identity of the 23.6% block of shares, currently held under a nominee account by Credit Suisse.

This block of shares will hold a lot of voting influence over any deal to sell the company's assets, and yet no one seems to know who the beneficial owner is.

Again, BRDB has done the right thing by writing to the relevant nominee companies for details of their shareholdings, albeit later than expected.

By The Star

BRDB will sell prized assets via open tender

PETALING JAYA: In a surprise development, Bandar Raya Developments Bhd (BRDB) has ceased all negotiations to sell its prized assets to its major shareholder, Ambang Sehati Sdn Bhd, and is now opting instead to dispose of them via an open tender.

In an announcement to Bursa Malaysia, BRDB said its board of directors had met with representatives of Ambang Sehati to discuss “misconceptions, views and concerns of the various stakeholders which have been raised, subsequent to the announcement on Sept 19, 2011 in relation to the proposed disposal” and “expressions of interest received from credible parties that have been communicated since the aforesaid announcement.”

BRDB said following the meeting, both it and Ambang Sehati had mutually agreed to call off the latter's offer to acquire BR Property Holdings Sdn Bhd, which owns Bangsar Shopping Centre, Menara BRDB, CapSquare Retail Centre and Permas Jusco Mall, for a sum of RM914mil.

However, Ambang Sehati will be invited to participate in the tender. Ambang Sehati is the investment vehicle of BRDB chairman Datuk Moiz Jabir Mohamed Ali Moiz as well as BRDB's major shareholder with 18.88%.

BRDB also said it had decided to appoint an independent international property valuation firm to manage the tender exercise, adding that an announcement on the tender would be made at an appropriate time.

In a statement, BRDB CEO Datuk Jagan Sabapathy said: “The board remains convinced that our earlier decision to accept the offer as well as the option not to conduct an open tender exercise was fair and appropriate at that time. However, the board has subsequent to its announcement of acceptance of Ambang Sehati's offer on Sept 19, received expressions of interest from credible parties for the four assets.

“In view of this, the board after a discussion with Ambang Sehati mutually agreed that under these circumstances, it would be best to put the assets up for sale by way of a tender exercise.”

The proposed sale of BR Property, which was announced last Monday, has drawn much public interest over several issues including the valuation of the four assets and the crucial 23.6% block of shares in BRDB held in a nominee account by Credit Suisse.

The 23.6% block is said to be quite influential in deciding if the deal goes through, as explained by the Minority Shareholder Watchdog Group.

This is based on the assumption that the block amounts to 30% of total disinterested shareholders of BRDB and may comprise 50% of votes of shareholders who actually turn up to vote on the matter, which requires only a simple majority to be passed.

The identity of the beneficial owners of the 23.6% block in BRDB is not yet known, but the company had told StarBiz prior to its announcement to Bursa Malaysia that it was in the process of ascertaining this.

“We are attending to the query by Bursa Malaysia and will be writing to the relevant nominee companies for details of their shareholdings,” a BRDB company official said.

Under Section 69(0)(8) of the Companies Act, Bursa and the Securities Commission have the power to direct companies to disclose the identity of the beneficial shareholders of substantial blocks of shares in the company. Section 69 also empowers the affected issuer itself, meaning BRDB, to request for details on the beneficial owners from a trustee, which is Credit Suisse.

While Bursa Malaysia has yet to clearly state if it has invoked this power, reliable sources told StarBiz last week that the exchange had queried BDRB on this issue.

By The Star

Bandar Raya changes tack

BRDB says it will cease negotiations with Ambang Sehati which had offered to buy The Bangsar Shopping Centre, Menara BRDB, Capsquare Retail Centre and Permas Jusco Mall for RM914 million.

Kuala Lumpur: Exactly a week after announcing a deal to sell its key assets to a major shareholder, Bandar Raya Developments Bhd (BRDB) has decided to scrap the deal and call for a tender instead.

This was done after concerns were raised by stakeholders while "credible parties" had expressed interest in those assets, BRDB said in a statement to Bursa Malaysia yesterday.

But it did not say which stakeholder had voiced concerns and it also did not identify the parties keen on its properties.

BRDB said it will cease negotiations with Ambang Sehati Sdn Bhd which had offered to buy the four properties - The Bangsar Shopping Centre, Menara BRDB, Capsquare Retail Centre and Permas Jusco Mall for RM914 million.

It has also decided to sell the assets by way of tender after a meeting between the board and representatives of Ambang Sehati yesterday.

But Ambang Sehati, controlled by BRDB chairman Datuk Mohamed Moiz Jabir Mohamed Ali Moiz, will be allowed to join the tender.

Ambang Sehati holds 18.8 per cent of BRDB.

"...the board has decided that it will appoint an independent international property valuation firm to manage the tender exercise," BRDB said.

On September 19, BRDB's chief executive officer Datuk Jagan Sabapathy said the board had not conducted an open tender because it may affect the smooth operations of the retail centres.

The meeting between Ambang Sehati and BRDB board also discussed "misconceptions, views and concerns of various stakeholders which have been raised" after the September 19 announcement.

They also talked about "expression of interest received from credible parties that have been communicated" since the announcement, BRDB said.

Analysts have said that the related party deal may face resistance from minority shareholders as BRDB was not using the bulk of the sale proceeds to replenish its land, which is what it needs.

BRDB had planned to distribute RM390 million to shareholders via a net cash dividend of 80 sen apiece, and use RM302 million to pare down debt.

By Business Times

MPHB sells Menara Multi-Purpose to MCA for RM375mil

Menara Multi-Purpose, which is 99% occupied, has rental income of RM2.1mil per month

PETALING JAYA: The Menara Multi-Purpose office tower in Kuala Lumpur will be sold to the MCA for RM375mil cash.

In a filing with Bursa Malaysia, Multi-Purpose Holdings Bhd (MPHB) said it had entered into a sale and purchase agreement with MCA for the sale of the 17-year-old office tower together with 414 car park bays within the Capital Square development.

The office tower has a total net lettable area of 541,424 sq ft, and is 99% occupied with a rental income of RM2.1mil per month as of July.

The net book value of the office tower and car park bays was RM175.4mil as of Dec 31, 2010, based on the audited financial statements of MPHB.

However, a valuation by Henry Butcher Malaysia Sdn Bhd on April 20 deemed the office tower and car park bays to have a market value of RM384mil.

MPHB said its original cost of investment in the office tower from 1993 till 1996 and car park bays in 2004 was RM289mil.

Proceeds from the sale, which is due to be completed by the end of this year, will be utilised to repay MPHB's bank borrowings.

MPHB said the rationale for the sale was part of the group's asset rationalisation exercise to dispose of its non-core assets.

The group's gearing would drop to 0.88 times from 1.1 times (as of April 28) after the sale is completed.

By The Star

MCA buys Menara Multi Purpose

KUALA LUMPUR: The Malaysian Chinese Association (MCA) has closed the deal on the Menara Multi Purpose for RM375 million, just in time to celebrate the purchase with its delegates at its AGM this weekend.

In an announcement to Bursa Malaysia yesterday, Multi-Purpose Holdings Bhd (MPHB) said it has disposed of Menara Multi Purpose together with 414 car park bays free from encumbrances. The company is expected to gain RM199.6 million from this disposal and will use the proceeds to repay its borrowings.

“The proposed disposal forms part of the group’s asset rationalisation exercise to dispose of its non-core assets. The proposed disposal is expected to improve the gearing of the group as the sale proceeds will be utilised to pay down the company’s bank borrowings,” MPHB noted.

After the proposed disposal, MPHB’s net asset will improve to RM2.02 from RM1.88 as at April 28, 2011 while net gearing will improve to 0.88 times from 1.1 times in the same period.

MPHB’s original investment in the property amounted to RM289.02 million while it was last valued in April 2011 by Henry Butcher Malaysia Sdn Bhd at RM384 million. The net book value of the property as at Dec 31, 2010 is at RM175.3 million.

The 17-year-old freehold building has 99.07% occupancy with monthly rental income of RM2.09 million (gross rental per month ranges from RM4.25 per sq ft for upper floors to RM10.95 psf for lower floors), which will allow MCA to earn a steady recurring income.

The Edge had on Aug 15 reported that MCA was keen to acquire the 43-storey grade-A office block, which is located near Kuala Lumpur’s Jalan Dang Wangi. A source had revealed that the parties were in talks and the purchase price ranged from RM350 million to RM400 million.

With regular dividend from Star Publications (M) Bhd, MCA would be able to finance the acquisition. Star’s dividend has been no less than 20 sen since FY2002 ended Dec 31. FY2010 was the record dividend payment year when Star declared 63.1 sen dividend per share.

Being the largest shareholder of Star, Huaren Holdings Sdn Bhd, the investment arm of MCA, had been the main beneficiary of the generous dividend payment.
Calculations based on the dividend returns over the years show that Huaren received about RM373 million in dividends form Star between 1997 and 2009.

Last November, shortly before the special dividend payment at month-end, Huaren ceased to be the major shareholder of Star. Filings with Bursa Malaysia showed that Huaren had disposed of 313.3 million shares or 42.4% stake in Star to MCA on Nov 4, 2010.

With the share purchase, MCA’s portion of dividends declared by Star last year would amount to RM126 million.

According to MPHB, MCA is expected to make payment in two tranches of RM87.5 million and RM250 million within 30 and 90 days respectively of the sale and purchase agreement (SPA) date yesterday. Payment of RM7.5 million and RM30 million will be paid earlier as earnest deposit and upon the execution of the SPA respectively.

The proposed disposal is expected to conclude by year-end.

By The EDGE Malaysia

Tune Hotels aims to have 100 hotels by 2015

KULIM: Tune Hotels aims to have a network of 100 hotels in Malaysia and overseas by 2015, says its chief executive officer, Mark Lankester.

He said the company would invest between US$5mil and US$15mil in a hotel with 150 rooms and above.

Lankester said next year, Tune Hotels planned to open 25 to 30 hotels internationally, including five in Indonesia, Thailand and Phillipines respectively, besides four or five hotels in Malaysia.

"Currently, we have 13 hotels, including two in Bali, Indonesia and one in England.

"In Malaysia, we have hotels in Kuala Lumpur, Kota Kinabalu, Kuching, KLIA-LCCT Airport, Penang, Johor Bahru, Kota Damansara, Bintulu, Kota Bharu and now Kulim," he told reporters after the opening of Tune Hotel Kulim, located near Kulim Landmark Central, here today.

Kulim Municipal Council president, Mohd Zohdi Saad, opened the hotel.

Lankester said Tune Hotel Kulim was its second hotel in northern region after Penang and the first in Kedah. "We have always said that within Malaysia we want to provide the most complete coverage for travellers and businesses and the opening of Tune Hotel Kulim is a further step in that direction," he said.

Lancaster said Tune Hotel has pioneered a branded value hotel brand with the concept of pay-as-you use that has become hugely popular among travellers from across the world. "Under the concept, guests only pay for room rates with the option of adding on other amenities like towels and toiletries, air-conditioning, in-room WIFI and satellite TV service and selected hotels," he said.

In conjunction with the recent Merdeka and Malaysia Day celebrations, Tune Hotels is currently running a special promotion with rooms in Malaysia on offer from as low as RM1 per night while those in Bali RP10,000 per night.

The promotional rates are available on a first-come first-served basis, for stay period from June 1, 2012 to Aug 31, 2012. Booking ends on Sept 30.

By Bernama

Funtasy Island to develop eco theme park

KUALA LUMPUR: Resort developer Funtasy Island Development Group has unveiled its multi-million-ringgit eco theme park project called Funtasy Island.

Funtasy Island Development is expected to complete the first phase of the construction with the exclusively built aqua villas by 2013.

Founder and creator Michael Yong said the project is expected to attract of a steady clientele as investors, property owners and tourists have expressed an interest in the project.

He believes the project will benefit Asean.

"Due to its proximity to ... Malaysia, Indonesia and Singapore, this project will be advantageous to stakeholders and the public in terms of logistical supplies, human resource and greater business activities for Malaysia, Singapore, Hong Kong and other Asian cities," Yong said at the official launch of the project in Hong Kong on September 12.

Funtasy Island, covering 3.28 million sq m, will be made up of six islands south of Singapore's Sentosa Island and near Batam Island in Indonesia.

Facilities at the Eco Park will include world's largest ecological theme park, water sports club, aquatic breeding zone, restaurants, retail outlets, cafes and others.

Funtasy Island Development has a strong presence in China, Hong Kong, Indonesia and Malaysia, and has developed Bali Resort City, Xsport Senayan, Pluit Mega Mall in Jakarta, IBN Tower in Batam, and Novus Gawana Resort in Bali.

By Business Times

Iskandar Malaysia gets more hospitality investments

JOHOR BARU: More investments are coming into the hospitality industry in Iskandar Malaysia from domestic and foreign players within the next three years, which will add 3,000 more rooms in the region.

No less than four hotels and service apartments have pledged to provide at least 3,000 more rooms in Iskandar Malaysia by 2014.

The investment is timely as it coincides with the opening of the Kulaijaya Premier Outlet this November and Legoland in Nusajaya in the third quarter of next year.

They include the 900-room KSL Resort in Taman Century; the 198-room Granada Hotel in Bukit Indah; the 300-room Renaissance Hotel in Permas Jaya; the 292-room Traders Hotel in Nusajaya; and the 293-room Palazzo Hotel and Serviced Suites at the Danga Bay.

Johor Menteri Besar Datuk Abdul Ghani Othman said Iskandar Malaysia may not have sufficient rooms to cope with the influx of tourists to the premier outlet and theme park in the next two years.

He said things will change by 2014 when Iskandar Malaysia will have more star-rated hotels and serviced apartments. "By then, we have quality rooms for visitors, as well as serviced apartments for professionals and expatriates who are likely to relocate to Johor for jobs," he told reporters after the ground-breaking ceremony of the RM105 million Palazzo Hotel at Danga Bay on Saturday evening.

The 27-storey hotel will be developed by Lentang Cahaya (M) Sdn Bhd, a wholly-owned subsidiary of the Waz Lian Group. It is expected to be ready in the second quarter of 2014.

Ghani said Dijaya Corporation had announced plans to develop a luxury serviced apartment, while the Danga Bay Group is planning to build no less than two major hotels at the marina area in Danga Bay.

Moving over to the east coast of the state, he said Khazanah Nasional Bhd is working on a multi-billion ringgit development plan to transform Desaru into an integrated and premier lifestyle destination.

"In the pipeline is the building of two international class hotels and a golf course.

"There will also be a theme park with a tropical eco-adventure and water features, as well as a convention centre," he said.

Ghani said the recent opening of the Senai-Desaru Expressway has improved accessibility to the east coast significantly, thus, more hospitality investments are expected to pour into Desaru.

By Business Times

GLCs vs private developers?

UEM Land Bhd's acquisition of Sunrise Bhd, which developed Mont'Kiara in Kuala Lumpur, created the country's largest property development company by market capitalisation.

PETALING JAYA: When Sime Darby Bhd acquired a 30% stake in Penang-based Eastern & Oriental Bhd, it was just the latest in a series of acquisitions led by government-linked companies (GLCs) in private sector property developers.

Late last year, government-owned UEM Land Bhd acquired Sunrise Bhd to create the largest property development company in Malaysia by market capitalisation.

Last year too, Malaysian Resources Corp Bhd (MRCB) and IJM Land Bhd proposed a merger which would have created the country’s second largest property player with a market capitalisation of over RM7 billion and a landbank of over 9,000 acres (3,600ha), but the deal fell through. Analysts and market observers speculated that it was because neither could decide who would lead the merged entity.

In addition, most of the private property developers now have a major government-related shareholder, usually a fund.

For instance, S P Setia Bhd’s two largest shareholders are Skim Amanah Saham Bumiputera (20.1%) and the Employees Provident Fund (15%), while its CEO Tan Sri Liew Kee Sin owns a 12% stake, according to its latest annual report.

In the case of Mah Sing Group Bhd, managing director Tan Sri Leong Hoy Kum holds a 35.2% stake while various government-related funds such as Koperasi Permodalan Felda Malaysia Bhd, Permodalan Nasional Bhd, the EPF, Kumpulan Wang Persaraan and Valuecap Sdn Bhd collectively own a 20.8% stake, according to its latest annual report.

“What we notice is that the government or GLCs are buying into private sector companies. We can’t help but wonder if this is the crowding out effect and if the government is looking to become a dominant player in the property sector,” said an analyst.

In Hong Kong or Singapore, the government’s role in property development is clear cut: to ensure the steady release of land to avoid either overbuilding or excessive speculation and to ensure the availability of affordable housing for the population.

“Over here, the government is mainly buying into developers that operate mainly in the high end of the market. In other words, not the ones that build affordable residences,” he said.

On the other hand, there is almost an equal urgency to privatise parcels of government land in strategic areas. In 2009, the government decided to swap a 62.5-acre piece of prime land in Mont’Kiara for a RM628 million trade and convention centre by the Naza Group.

It is also privatising the 495-acre plot of land on which the Sungai Besi air base is sited, the proposed 75-acre Kuala Lumpur International Financial District project near Jalan Tun Razak and the 3,300-acre Rubber Research Institute land in Sungai Buloh.

In fact, part of the rationale for the MRCB-IJM Land merger was to give the merged entity an edge in developing the EPF-led development of the Sungai Buloh project.

So, as the government releases more of its land to the private sector, it seems — ironically — to be taking a bite out of the companies that would most benefit from these projects.

A market observer said there may be another reason for the government’s increasing interest in the property sector. “They may be acting as the buyer of last resort. If you talk to developers, some of them think that Malaysia is already fully supplied with homes. Many families have multiple homes and have bought for the next generation. In addition, our household debt to GDP is relatively high at about 75%, so the propensity to borrow is limited. Thus, some developers may be cashing out,” he said.

The increases in housing prices have generally lagged GDP growth since the end of the 1997-98 Asian financial crisis, but over the last two years there has been a surge in prices, which is generally regarded as making up for the lag in prices for the last decade.

“Housing prices went up by an average of just over 3% annually while GDP growth in the same period was about 5% to 6% a year. The increases in housing prices usually track GDP growth, so there was obviously a lag. But it may be because housing supply increased substantially in that time.

“In the last two years, however, there was a large jump in prices so it was more of a ‘catching up’ than the start of a bubble. After this one-off re-rating though, it is unclear if prices will continue rising and the housing developers may be cashing out,” the analyst added.

This suggests the government could be functioning as a buyer of last resort, especially since there has been little foreign merger and acquisition interest in listed Malaysian property developers.

Still, it could just boil down to attractive valuations. After all, the majority of Malaysian property stocks have generally — and long — been undervalued and most trade well below their revised net asset value, and some even below their historical book value.

Thus, some of the acquisitions are seen as advantageous to the GLCs. One such example analysts cite is UEM Land’s purchase of Sunrise, which was priced at single price-to-digit multiples, and came with strong branding, a large pool of unbilled sales and a pipeline of ready-to-launch projects that will support UEM Land’s near-term earnings.

Other analysts disagree with the notion of GLCs being buyers of last resort. UOB Kay Hian Research head Vincent Khoo dismissed the perception. “Every company is looking for growth opportunities and the property sector, which has been booming for the past few years, would be their target.”

But why only the high-end developers? “You don’t maximise your profit by selling cheap houses,” said Khoo.

MIDF analyst Sean Liong agreed. “All these funds have a mandate to get certain returns. That’s it. I don’t think there is any hidden agenda. And I don’t think the GLCs have an unfair advantage when it comes to bidding for the privatised land.”

Affin Investment Bank property analyst Isaac Chow was more succinct. “If it’s a business move, it’s a business move. It’s just a matter of investment.”

By The EDGE Malaysia

Sunhor optimistic amid challenges

Soho style: Lim by a wall-sized artist impression of Tigaman Square. He says a predominantly industrial area would augur well for a retail outlet.

Sunhor Property Bhd group managing director C.T. Lim is ready to face challenges in his company's maiden commercial development in Bukit Kemuning, Shah Alam.

The bottom three levels feature retail units, followed by two levels of parking space, and one level of office suites with a Soho concept.

The “pull factor” will be the retail outlets, which Lim hopes will turn Tigaman Square into a trendy shopping spot and Bukit Kemuning into a vibrant business and social venue.

But sceptics doubt that the project will be able to woo tenants, given the profile of its immediate surroundings, which comprise mostly industrial lots and the lack of a strong population to support the retail portion of the development.

Lim, however, remains optimistic. He believes that the challenges the Tigaman Square development faces involve where the project's opportunities lie.

“People say that it's mainly an industrial area and that the population is not sufficient to support commercial development, especially for shopping or retail outlets,” Lim tells StarBizweek.

Citing a recent demographic study, Lim says the population within a 5km radius of the Tigaman Square development stood at 426,706 people in 2010 and is expected to grow to 626,311 by 2015. He says a population of 626,311 people matches that of Petaling Jaya, which has over 520,000 people currently.

“With a population of over 600,000 people (within a 5km radius of Tigaman Square), it should be able to support malls like in Petaling Jaya.”

There are those who argue that the PJ population is relatively more affluent, but Lim disagrees.

“Places like Kota Kemuning and Bukit Rimau are mature areas. There are houses there costing RM700,000, similar to those in PJ and Shah Alam.”

Lim also argues the fact that Bukit Kemuning, as a predominantly industrial area, would augur well for a retail outlet.

“An operator of an industrial lot would need to be more affluent than a shoplot operator. If an area is classified as an industrial area, there should be more affluent people there. And at this point, they don't have anywhere to go to spend their money,” Lim says, adding that Tigaman Square would be the only retail outlet of its kind within a 5km-10km radius.

Lim says the company is also banking on the lack of retail developments in the vicinity for the project's success.

He says the nearest retail or shopping outlets such as Plaza Alam Sentral or PKNS complex (Shah Alam), Jusco Bukit Tinggi (Klang) or The Summit (Subang Jaya) are all more than 5km away.

He adds that Tigaman Square will be easily accessible via major roads and highways like Lebuhraya Kemuning-Shah Alam and Kesas Highway.

The retail portion of Tigaman Square will comprise mostly food and beverage (F&B) outlets or between 35% and 40% of the total retail tenant mix, says Lim.

“With over 400 factories within the area, we also want to target factory workers who can come here and have their lunch,” he says.

Lim says a wide mix of F&B tenants will be chosen so that they would complement each other rather than compete with one another.

“About 20% of the total retail space has been taken up and will hit 90% by the time the project is completed.

Sunhor recently had a ground-breaking ceremony for the Tigaman Square development and the project is slated for completion by 2013.

“Most commercial projects take three years to complete but we want to build everything in two years,” says Lim.

Located on 7.69 acres of freehold land, Tigaman Square is expected to have a gross development value (GDV) of RM240mil.

“We expect it (GDV) to be more by the time the project is completed,” Lim says, adding that prices of its units are “competitive” compared to its nearest competitors.

“Our retail units are going for RM650 per sq ft while the office space is from RM375 per sq ft.”

The offices will be partly furnished by Signature Kitchen, a leading player for branded modular kitchens. Tigaman Square will also feature alfresco dining and roof gardens.

“We want to make it as vibrant as possible. At the end of the day, it's about keeping it interesting,” Lim says.

By The Star

Property developers on softer ground

Kuala Lumpur: Property companies' earnings growth in fiscal 2012 will be affected by lower sales, analysts warn.

Property developers are revising their sales target because of the gloomy outlook, especially in international markets.

Companies such as Berjaya Land Bhd, SP Setia Bhd and Gamuda Bhd may be in for some choppy times, given their exposure to the property sector in Vietnam, analysts added.

"They were bullish on their sales target but people on the ground may have provided new insights on how the market in Vietnam will perform," an analyst with a foreign research house told Business Times.

The property market in Vietnam has been suffering from the tightening of monetary policy and high lending interest rate.

Also, foreign investors remain in a cautious mood due to domestic economic problem as well as gloomy outlook of global economics.

A construction analyst from MIDF Research said Gamuda may be cutting its sales target after taking into consideration the combined factors.

"We had a 'buy' call on Gamuda with target price of RM4.68. However, looking at the weakening market condition, we are relooking our target price with a downward bias," the analyst said.

Gamuda, a construction and engineering group, has two projects in Vietnam, namely Gamuda City, a 200ha mixed township which is expected to rake in a gross development value (GDV) of US$9 billion (RM28.6 billion) over nine years, and Celadon City.

Celadon City is expected to generate RM5.5 billion in GDV over nine years. The project is slated for launch in the current quarter.

Gamuda initially was aiming for RM2.8 billion in property sales for fiscal 2012, expecting RM1.5 billion from Vietnam and the rest from local property projects. But it has more than halve its property sales target in Vietnam to RM650 million.

The MIDF analyst expects Gamuda to start recognising earnings from the property sales in Vietnam from 2012 onwards.

For the first nine months of its current financial year ending April 30 2011, Gamuda posted a net profit of RM116.6 million, 40 per cent more than the same period last year.

The stock has fallen 23 per cent between August 1 and September 22 this year.

Gamuda's stock rating was cut to "hold" from "trading buy" at ECM Libra Capital Sdn Bhd to reflect concerns over the company's "exposure" to Vietnam's property market.

By Business Times

BRDB getting fair deal for assets?

Hogging the spotlight this week was Bandar Raya Developments Bhd's (BRDB) acceptance of Ambang Sehati Sdn Bhd's proposal to buy over its assets for RM914mil, subject to shareholders approval.

Much of the argument and confusion has centred on the valuation of the assets and on BRDB's ability to make up for the loss of income from its investment properties.

The assets in question are BR Property Holdings Sdn Bhd which owns the successful Bangsar Shopping Centre and Menara BRDB as well as the CapSquare Retail Centre and the Permas Jusco Mall. With the proposed disposal, the board proposes to pay a special dividend of 80 sen net per share or RM390mil. While most analysts agree that this is a generous payout, they are more concerned with the company's earnings stream moving forward.

Should this deal be wrapped up by the first quarter of 2012 as targeted, BRDB stands to gain cash of RM860mil.

This is because Ambang Sehati will acquire all the assets and liabilities of BR Property, which will see BRDB netting RM430mil in cash and the repayment of RM430mil in borrowings and dividends from BR Property to BRDB.

Of this, BRDB plans to reduce its borrowings by RM320mil, pay out RM390mil in the special dividend and use the remaining RM168mil for working capital. BRDB's borrowings will drop from 0.71 times to 0.38 times, or from approximately RM1bil to RM248mil.

Ambang Sehati, which owns 18.8% in BRDB, is a private vehicle of Datuk Mohamed Moiz Jabir Mohamed Ali Moiz, who is chairman of the property firm.

BRDB chief executive officer Datuk Jagan Sabapathy has said the proposed sale of the group's investment properties for RM914mil was also based on an initial yield of 6% for the retail assets and 6.5% for the office, was fair.

“At this price and this yield, it is fair. We get to sell our assets at 6% yield, while most people do it at 7%,” Jagan told StarBizWeek recently.

A reasonable deal

“When we first announced this deal, I knew we were going to get walloped. People would say it was a related party transaction and we were selling our best assets,” says Jagan.

“I always believe that we do not sell in a down market. Different people have different horizons. No one has lost money buying properties - but its about their holding power. As BRDB is a public-listed company, it is my job to maximise returns for my shareholders,” says Jagan.

He adds that selling BSC was particularly emotional for him, as he has spent a decade of his life with BSC.

“However, do we ignore the offer by Moiz just because he is a substantial shareholder of the company? It is the fiduciary duty of the board to entertain everybody who puts an offer on our table. There has been more than enough time for people to come to me in the last two weeks to put in another offer. The board has a duty to look at it. No one has come forward to put in a bid,” he says.

Jagan says it is easy for the naysayers to claim that the deal is not fair.

“Lets just say we put it in an open tender, and we get a lower price. What happens then? The board will have to take responsibility. At a yield of 6%, we knew we had to consider this deal,” says Jagan.

On the dividend of 80 sen net per share, Jagan added that every shareholder who was holding on to its shares now would be happy.

“They are getting 80 sen net per share. That is equivalent to a 11 year payout in one year. On average, BRDB has been paying dividends of 7.5 sen every year,” says Jagan.

Jagan added that as the company's gearing now drops to 0.38 times from 0.7 times, it gives the company plenty of flexibility to lookout for more land deals and gear up if necessary.

“Now we have reserves to grow the company. With our existing projects, we have more than enough to compensate our earnings from those four assets,” he says.

Currently, the sale of the assets in question at RM914mil, make up 29% of BRDB's total asset base.

Despite making up almost 26% of BRDB group's total assets, they only contribute less than an average of 5% to BRDB's total revenue and profit before tax for the last three years.

After three years in operation, Capital Square Mall is still bleeding, with the mall losing RM8mil last year. Pikom, (The National ICT Association of Malaysia) has taken over CapSquare mall, and is in the midst of turning it into an Information Technology Centre. As this deal with Pikom spells more sustainability, rental yields will have to go down, to compensate for the longer term nature of the lease.

Is 6% fair?

In the world of real estate, valuers now use the capitalisation rate to value properties. This term is loosely interchangeable with “yield”. Thus, when valuers speak of yield in valuing a property, they are in fact referring to the capitalisation rate. The capitalisation rate is the ratio between the rental income produced by an asset, divided by its capital cost (the original price paid to buy the asset or alternatively its current market value).

In the case of BRDB, the assets in question were valued based on a yield (capitalisation rate) of 6% for the retail assets and 6.5% for the office asset. The capital cost was also the market value of all the properties as of Sept 1, 2011.

CB Richard Ellis Malaysia executive chairman Christopher Boyd says that nowadays, the determinant of the value of a property is gauged by its yield.

This is a departure from the old days where value was determined on a ringgit per sq ft basis.

“Properties are valued on a yield basis because typically, they are now purchased for investment purposes,” explains Boyd.

If a property generates rental income of RM1mil per year, its value will thus be determined by the yield.

“A 10% yield would mean that the property is valued at RM10mil. A 5% yield would value the property at RM20mil while a 20% yield would value the property at RM5mil,”

In other words, a lower yield fetches a higher price, while a higher yield fetches a lower price. It is an inverse relationship.

“So the rental amount is fixed. It is the yield that changes. In Malaysia, the asking yield is typically between 6% and 7%. Most of the large institutions will target for a 7% yield,” he says.

He added that Sunway Real Estate Investment Trust (REIT), which has properties valued at about RM3.7bil, was REITED at a yield of 6.93% in 2010.

This shows that BRDB's valuation of 6% is at ballpark figure.

Sources say that Pavilion Kuala Lumpur, which is slated to be Malaysia's largest initial public offering for a REIT, could be valued at a yield of 7%. Details are still sketchy at this point, but sources say the assets under it could be worth between RM4bil and RM5bil.

According to Hartamas Valuation & Consultancy Sdn Bhd managing director Ricky Lee, the lower the yield, the more secure and sustainable the income flow is, thus translating into a higher market value.

Lee says an investor can compare other secured yields in other types of investments such as fixed deposits, government bonds and the Employees Provident Fund (EPF) which were all below 6%, indicating the degree of security and sustainability of the investment.

“A very high yielding investment normally carries higher risk which in turn would command a lower value.”

By The Star

BRDB aims to deliver RM1bil in property sales annually

Bandar Raya Developments Bhd has residential property developments worth about RM6bil in recognisable gross development value (GDV) over the next three to five years, according to the group's chief executive officer Datuk Jagan Sabapathy.

The group is aiming to deliver property developments worth RM1bil in GDV every year, starting from its financial year ending Dec 31, 2012.

In the Klang Valley, the group's first phase of the Verdana residential development, consisting of two condominium towers in north Kiara, was launched in July with a take-up rate of more than 70% within a month.

The second phase will be launched in 2012 and the two phases are on 4.6 ha with a combined GDV of RM1bil.

Meanwhile, BluWater, a gated and guarded landed community development in Seri Kembangan, Kuala Lumpur, will be launched in four phases through 2011 and 2013.

Spread over 19 ha of waterside land, BluWater has a GDV of RM700mil.

Also set to launch at the end of this year is a residential development in Medang Serai, Bangsar.

Located on 2.4 ha of prime land in Bukit Bandaraya, this development is limited to 121 units and will net RM900mil in GDV for BRDB.

Plans are also in the pipeline to launch luxury residences in Taman Duta, Kuala Lumpur late next year with a projected GDV of over RM900mil.

“Having been established as a leading developer of luxury developments, primarily in the Bangsar neighbourhood, we are now diversifying into newer locations and different target markets. Our vision is to bring forward this unique cosmopolitan Bangsar lifestyle that we have been closely associated with and further strengthen our brand via intelligent design and inspiring aesthetics,” says Jagan.

Earlier this year, BRDB also entered into a joint venture agreement with Multi-Purpose Holdings Bhd (MPHB) to develop land in Penang as well as Mimaland and Rawang in Selangor.

The joint venture in Penang consists of 32 ha of freehold land to be developed near the Penang International Airport with a projected GDV of RM600mil.

The 130 ha Mimaland project is envisioned as a community set amongst natural water features and has a projected GDV of RM2.2bil while the106 ha Rawang development, with a GDV of RM1.4bil, will consist of landed residential homes and a commercial village. These three joint ventures will be launched at the end of 2012.

Another project to look out for is the 10 ha mixed development in Subang with commercial, retail and residential components, which is due to be launched in 2012 with a projected GDV of RM2bil.

In Johor, the third to sixth phases of The Straits View Residences in the Permas Jaya township will be launched over the next two years, with a GDV of RM188mil.

The area will also see the launch of three-storey shop offices with a GDV of RM61mil later this year.

Elita, the final phase of The Straits View Condominium, was recently launched with a GDV of RM89mil.

BRDB also has an agreement with UEM Land Holdings Bhd to jointly develop Puteri Harbour in Nusajaya, Johor as a prime waterfront destination for the region.

To be developed in six phases over seven years, the 44ha development in Nusajaya is expected to have a GDV of RM2.3bil with the first phase scheduled to commence next year.

By The Star

Mah Sing wins big at NST Property Awards

KUALA LUMPUR: Mah Sing Group Bhd won big at the NST Property Awards last night.

Group managing director/group chief executive Tan Sri Leong Hoy Kum was named Property Man of the Year and the group bagged the Best Lifestyle Developer award.

Held for the second time, the NST Property Awards saw the newspaper's property section, Property Times, honouring five nation builders at the Editor's Choice Awards.

The categories were Best Economic Redevelopment Zone, Best Broadband Utility, Best Property Management Company, Best Project Management Company and Best Real Estate Investment Trust. The recipients were Sepang Gold Coast, Telekom Malaysia Bhd, Sunrise Bhd, Andaman Property Management and Sunway Bhd respectively.

Meanwhile, the second S.C. Cheah Choice Awards, named after the veteran property journalist and NST Property Eyes columnist, saw 12 awards given out.

Recipients included Nadayu Melawati for Best Boutique Bungalow Development; K Residence KL for Best Luxury Residential Highrise Development; Ivory Properties Group Bhd for Best Penang Developer; Sagajuya (Sabah) Sdn Bhd for Best Sabah Developer; Superboom Projects Sdn Bhd for Best Perak Developer; Platinum Park for Best Iconic Development (by Naza TTDI Sdn Bhd); and The Haven Lakeside Residences for Best Resort Condominium (by The Haven Sdn Bhd).

By Business Times