TA Global to ‘add value’ to its Phuket resort

KUALA LUMPUR: TA Global Bhd, a 74% subsidiary of financial services group TA Enterprise Bhd, is looking into building a new block of hotel rooms for its latest acquisition, Movenpick Karon Beach Resort and Spa in Phuket, Thailand.

Tiah: ‘There is definitely potential to build another block just to cater to the convention business as there is a shortage of rooms during peak season.’

“We believe that we can add value (to this asset) because there is a redevelopment potential,” managing director cum chief executive officer of TA Enterprise Datin Alicia Tiah said.

The hotel, which sits on a piece of 20-acre freehold land, is one of two in Phuket that can hold convention facilities.

“There is definitely potential to build another block just to cater to the convention business as there is a shortage of rooms during peak season,” she said.

She reckoned that with direct flights from India and China to Phuket, the number of tourists would increase.

“We can build something, sell it and put back into the inventory. There are currently four blocks with all rooms sold except for one which does not have a sea view,” she told the media. The hotel, with an occupancy rate 86%, generates a yield of 9.1% according to Tiah.

The company has also gained approval from its shareholder in an extraordinary general meeting to enter a join venture with Birkbeck Trust to develop a hotel and residences building in Vancouver, Canada.

“The current risks for this project are construction risk and selling risk. The construction risk has been mitigated because 60% of the construction contract has been firmed up.

“We don't foresee any great height in the budget because prices of raw material and labour costs are still manageable,” she said.

Tiah expects the company to benefit from this project upon its completion as the market would have recovered by then.

She declined to name any hotels that would anchor the building but revealed that there were “many suitors”.

The building, which will stand as the second tallest in Vancouver, is also the last piece of work by the late Arthur Erickson, a prominent architect in Canada. The estimated gross value of this project is RM1.5bil.

“The basement is done so they will be putting up the structure soon,” she said.

She also revealed that the board had discussed the possibility of setting up a real estate investment trust now that the company held properties that are worth more than RM2bil.

On the group's stock broking business, she said TA Enterprise would be opening its seventh branch in Melaka in August. Tiah said the company would sell more products to raise the bottomline.

On the possibilities of acquisitions and mergers, Tiah said she said was open to join ventures if there were good partners.

By The Star

Hektar REIT bullish on strategies

CEO says acquiring neighbourhood malls will pay off

KUALA LUMPUR: Hektar Real Estate Invesment Trust (REIT) is firmly confident and bullish that its strategies in acquiring neighbourhood malls that are not necessarily located in the Klang Valley will pay off for its unitholders, especially in times of economic trouble.

You have to do your own analysis – history shows that we pay quarterly dividends for the last five years. — DATU JAAFAR ABDUL HAMID

REIT manager Hektar Asset Management Sdn Bhd's chairman and CEO Datuk Jaafar Abdul Hamid said that despite being among smaller listed REIT entities in the industry presently, it counted its strengths as being diversified and defensive in times of economic uncertainties around the world.

“We are too small to be compared with the bigger (retail) players. But, we have our niche. Of course people will say, Hektar REIT is small, compared with others which are bigger and more stable. But you have to do your own analysis history shows that we pay quarterly dividends for the last five years,” Jaafar told journalists after its EGM yesterday.

“Even though we are small, we are well diversified. The big ones (REITs), they are concentrated one big mall with big asset values. Imagine if you have any incidents (happening),” its executive director and chief financial officer Zalila Mohd Toon said.

Hektar REIT yesterday obtained the approval of its unitholders for the proposed acquisition of two shopping malls in Kedah Landmark Central Property (LCP) with a net lettable area of 280,000 sq ft in Kulim, and Central Square Property (CSP) with a net lettable area of 300,000 sq ft in Sungai Petani.

LCP opened in 2009 and its main anchor tenant is Giant Hypermarket. It has a 77% occupancy rate which is expected to rise to 99% once The Store commences its tenancy on Oct 15.

CSP was launched in December 1997 with The Store being its main anchor tenant with an occupancy rate of 99.5%.

These purchases will be partly funded by a renounceable rights issuance of up to 93 million net units in Hektar REIT, which have also been approved by its unitholders.

The manager is allocating RM19mil to refurbish the two malls which will be financed via internal funds and bank borrowings and is expected to be spent in 2013.

LCP will be bought for RM98mil and has an audited historical yields of 5.8% while CSP will be purchased at RM83mil with an audited historical yield of 6.4%.

“These are based on audited numbers that have been produced by the vendor. When we did our assessment when deciding whether or not we should acquire it is on the basis that it will be 7% at the point of entry. The minute Hektar REIT injects these two malls into its portfolio, the starting point will be 7% onwards,” its senior finance manager Raziff Suhairi Shaaban said.

“Post-acquisition there may be a slight earnings per unit dilution in the short term but, in terms of dividends per unit, we assure you that the dividends that we will be paying post-acquisition will be maintained at least as per 2011. Unitholders dividends will be maintained or improved from this year onwards,” Raziff said.

The acquisition signified its expansion into the northern region of Malaysia and was in accordance with its investment strategy of targeting prime neighbourhood malls as they were more resilient during times of economic downturn, capitalising on the economic growth and the vibrancy of the retail market, a statement issued by the manager stated.

By The Star

Battersea project to be worth £8b in 15 years

ICONIC LANDMARK: Sime Darby, SP Setia and EPF, via newly-formed Battersea Project Holding Co Ltd, will develop 15.6ha site into homes, offices and shops

The consortium comprising Sime Darby Bhd, SP Setia Bhd, and Employees Provident Fund (EPF), which bought London’s iconic Battersea power station for £400 million (RM1.97 billion), will redevelop the site to create a gross development value of £8 billion (RM39 billion) over 15 years.

The development of the Battersea Power Station project, which will see its four iconic chimneys preserved, covers an area of 15.64ha, involving homes, offices and shops.

In a statement issued yesterday, the consortium said the project is expected to see strong capital growth as it will be part of the strategic Vauxhall Nine Elms Battersea Opportunity Area Planning Framework, the largest urban redevelopment network area in central London.

The consortium agreed to buy the Battersea plant, Europe’s largest brick building, after its owner failed to pay debts and was put into administration.

A joint-venture agreement was signed between the three parties on Wednesday in Jersey, Channel Islands, to form a company called Battersea Project Holding Co Ltd (BPHCL).

Sime Darby and SP Setia each has a 40 per cent stake in BPHCL, while EPF holds 20 per cent.

BPHCL plans to implement the approved master development plan for the Battersea site, which was drawn up by award-winning architect Rafael Viñoly.

“London is a strategic and important target destination for property investment. As such, the Battersea project represents an excellent opportunity for us and our partners to expand our footprint in a key international market,” said Mohd Bakke Salleh, Sime Darby president and group chief executive.

The Battersea Power Station is located in the heart of London, on the south bank of the River Thames in the vicinity of Westminster.

Last month, about 15 bidders including Chelsea football club, owned by Russian billionaire Roman Abramovich, submitted plans to buy the site, the subject of repeated failed redevelopment attempts since it was closed almost three decades ago.

By Business Times

Kenanga Research maintains Market Perform on SP Setia

KUALA LUMPUR: Kenanga Investment Research is maintaining its Market Perform on SP Setia with a target price of RM4.05.

It said on Friday the target price was based on a 21% discount to its FD sum of parts RNAV of RM5.11 (excluding Battersea Power Station).

SP Setia had on Thursday entered into a contract for the proposed acquisition of Battersea Power Station site in London for 400mil pounds (RM1.97bil), post-28 days of the due diligence period.

Under the agreement, SP Setia, Sime Darby and the EPF's unit KWASA Global (Jersey) Ltd (KWASAJ) has proposed to set up a JV Co on equity stakes of 40:40:20.

Kenanga Research said the project gross development value (GDV) of 8bil pounds (RM39.4bil). Accounting for equity stake, this will increase SP Setia's total GDV by 30%.

“However, further details are still lacking. Details of project margins, initial size of first launch, etc. are still unavailable. The debt-equity funding structure has also not been finalised yet.has also not been finalised yet,” it said.

Kenanga Research said SP Setia's portion of land payment and the two years' development cost amounts to 240mil pounds (RM1.18bil).

“Assuming the typical 80:20 debt-equity ratio, SP Setia's net gearing will increase to 0.64 times from 2Q12's 0.32 times, which will be a record high level since 2007 and above our comfort level of 0.50 times.

“Although its strong billings can pare down the debt quickly, we do note that there are other capital intensive projects in the pipeline (KL Eco City, MoH land, Qinzhou Industrial Park@China),” said the research house.

By The Star