SIME Darby has entered into a conditional agreement with CapitaMalls Asia Ltd to form a 50:50 joint venture (JV) to develop a shopping mall in Taman Melawati, Klang Valley.
Sime is finally getting its act together in growing its property division, in line with the company's strategy to further unlock value for its property division through strategic joint ventures (JV). This JV shows the management's effort to further enhance and grow its property division.
Investment in shopping malls would also generate recurring income. Property investment made up only 5% of the property division's pretax profit (7% of financial year ended June 30, 2011 profit before interest and tax).
CapitaMalls Asia is Asia's leading shopping mall developer, owner and manager. It owns a few malls in Malaysia, such as Sungei Wang Plaza in Kuala Lumpur and Gurney Plaza in Penang.
This development will be CapitaMalls Asia's sixth mall in Malaysia but it will be its first greenfield development in Malaysia.
The shopping mall is strategically located at the centre of Melawati township and surrounded by established residential areas. This project would complement its on-going and future projects in the township. Sime has about 905 acres of landbank in the area.
The shopping mall has a site area of about 242,000 sq ft and a total net lettable area of about 635,000 sq ft. The total development cost is expected at RM500mil (RM250mil for Sime) and it is likely to be funded internally given Sime's strong cash position.
Marginal earnings impact (expected) from this JV. We are not expecting any material earnings impact arising from this JV in financial years 2012 to 2014 given that this development is scheduled for completion in 2016. Also, the property division contributed only about 7% of profit before interest and tax in financial year 2011.
By The Star
Friday, May 11, 2012
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