Titijaya sticking to affordable housing

Titijaya Land Bhd (April 6, RM1.77)

Maintain hold with a higher fair value (FV) of RM1.72: We met with the management of Titijaya Land Bhd recently to get the latest updates on the company. We were encouraged by the management’s commitment to continue focusing on the affordable segment, with the majority of its new launches in the financial year ending June 30, 2017 (FY17) and FY18 catering to this particular segment. We believe demand for products within this segment would remain resilient even during the current sector slowdown.

Management has lined up new launches with a total gross development value (GDV) of RM2 billion in 2017. The biggest launch is The Shore@KK in Kota Kinabalu (RM575 million GDV).

As for the long term, it has projects valued at around RM13 billion GDV that are expected to be launched in the next few years, which will keep it occupied until 2027 and provide a sustained earnings visibility to the group.

As at end-first half of FY17 (1HFY17), Titijaya’s net gearing stood at 33%, which provides the company ample room to undertake land banking. Titijaya’s total unbilled sales stood at RM471 million as at end-1HFY17, which would provide earnings visibility to the company for the next two years. The company registered total new sales of RM143.6 million in 1HFY17, supported by its ongoing projects.

One of the unique strengths of Titijaya is its ability to acquire land bank through joint ventures and land swaps with strategic partners, which would minimise capital outlay and land holding cost. We expect the company to hit its sales target of RM300 million for FY17, a flat growth compared to FY16, but still commendable in view of the challenging market conditions.

Titijaya’s proposed renounceable rights issue of up to 614.99 million irredeemable convertible preference shares (ICPS) on the basis of three ICPS for every two existing shares of 50 sen each has a conversion ratio of either 10 ICPS into one share or a combination of one ICPS and cash payment of RM1.485 for one share. This will strengthen Titijaya’s position to fund its ongoing projects and source for landbank.

We resume coverage of Titijaya with a “hold” call and a higher FV of RM1.72 per share, based on a 20% discount to its revised net asset value at RM2.15. — AmInvestment Bank, April 6

This article first appeared in The Edge Financial Daily, on April 7, 2017.

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from TheEdgeProperty.com http://www.theedgeproperty.com.my/content/1114470/titijaya-sticking-affordable-housing

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MRCB’s foray into India a good move

Malaysian Resources Corp Bhd (April 6, RM1.76)

Maintain buy with an unchanged target price (TP) of RM2.10: Malaysian Resources Corp Bhd’s (MRCB) recent joint venture (JV) with Adani Realty could spur its growth prospects by looking out for higher-margin projects and sharing its expertise in developing transit-oriented development (TOD) projects in India.

Projects developed by Adani Realty such as the upcoming Inspire BKC and Inspire Hub are both located in prime areas of Mumbai with access to public transport such as rail — drawing similar strength to MRCB albeit Adani’s lesser experience. Other property developers in India of similar stature such as Lodha Group and Oberoi Realty have similar project profiles in which MRCB could consider to impart its experience in TOD development.

We prefer MRCB to partner directly with Mumbai Suburban Railway to pass on its expertise. This would open up immediate access to developers with land or development close to the prime locations of Andheri, Bandhra and Mahalaxmi alongside the Western railway line in Mumbai.

Reliance Anil Dhirubhai Amabani Group (Reliance) has partnered with Samsung C&T India Pvt Ltd to build Dhirubhai Ambani International Convention and Exhibition Centre amounting to US$680 million (RM3.01 billion). The project is slated to be completed in the fourth quarter of 2017. Assuming the JV is on a 51%-49% basis on the back of a 9% profit margin, Samsung would stand to benefit US$29.9 million (49%) to its bottom line.

While we can only illustrate a comparable, it is expected that the JV for projects between MRCB and Adani would be formed on the same basis. We reckon that significant impact on earnings will only be meaningful to MRCB should the project clinched be more than US$600 million with profit margin assumptions estimated between 11% and 15.5%.

Given the prospect of TOD projects in Malaysia and India, MRCB  shares are still attractive at 19.8 times forward earnings despite trading above its average three-year price-earnings ratio of 10.57 times. We maintain our “buy” call with an adjusted sum-of-parts based TP of RM2.10 per share, suggesting the shares have another 15.2% upside. — MIDF Research, April 6

This article first appeared in The Edge Financial Daily, on April 7, 2017.

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from TheEdgeProperty.com http://www.theedgeproperty.com.my/content/1114468/mrcb’s-foray-india-good-move

Melaka-centric developer Yong Tai a diamond in the rough

Yong Tai Bhd (April 6, RM1.55)

Initiate buy with a target price (TP) of RM2.10: Yong Tai Bhd has successfully transformed into a Melaka-centric township property developer via its integrated 138-acre (56.25ha) Impression City with a RM7.7 billion gross development value, featuring the first-of-its-kind Impression Melaka — an iconic tourist landmark that showcases large-scale live cultural music performances.

As the first Impression Series outside China, the Strait of Melaka-fronting Impression Melaka is poised to be a resounding success by tapping into the booming Chinese tourism in Malaysia, which has seen an impressive 11% tourist arrivals compound annual growth rate (CAGR) from 2000 to 2016 (against 1% CAGR for Malaysia’s overall tourist arrivals), making it the third-largest tourist source market.  Also, Impression Melaka offers compelling value proposition given its estimated 20% internal rate of return over the 30-year concession, thus transforming Yong Tai into an emerging cash cow with a strong recurring income.

There is great potential in the Melaka property market, which is targeting not just its 900,000 local population, but also over 16 million tourists that visit the World Heritage City annually. Yong Tai’s impressive unbilled sales of RM990 million — anchored by en bloc sales of 262 retail lot units in Impression City for RM873 million — will underpin strong earnings visibility over the next two years. We believe Impression City’s attractive investment merit is under-appreciated by investors, and the official opening of Impression Melaka in February 2018 will be a major catalyst.

Given Yong Tai’s unrivalled competitive advantages arising from its unique tourism appeal and synergistic property product offerings, it is expected to deliver exponential earnings per share CAGR of 57% over its financial year ended June 30, 2016 (FY16) to FY19F (forecast). We envisage long-term earnings visibility for Yong Tai, reflecting the increasingly close Malaysia-China ties. — AllianceDBS Research, April 5

This article first appeared in The Edge Financial Daily, on April 7, 2017.

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from TheEdgeProperty.com http://www.theedgeproperty.com.my/content/1114462/melaka-centric-developer-yong-tai-diamond-rough

Boustead sees better earnings as economy picks up

Tan Sri Lodin Wok KamaruddinKUALA LUMPUR (April 7): Boustead Holdings Bhd is banking on better economy, higher government spending and higher foreign direct investment (FDI) for better earnings this year.

Boustead deputy chairman and managing director Tan Sri Lodin Wok Kamaruddin, who is expecting a much better year for Malaysians as a whole, said Boustead, as a diversified group, will benefit from that.

“We are in six key sectors of the Malaysian economy. With improved government spending, more economic activities, we will benefit directly and indirectly,” he told reporters after the company’s annual general meeting yesterday.

He said the government is bringing in more FDIs, which will spur demand for financing facilities and in turn benefit its banking arm.

Besides finance and investment, the group is in plantation, property, pharmaceutical, trading and industrial, and heavy industries.

Lodin, who expects all the group’s sectors to be resilient this year, does not discount the possibility that the group could see another boost from the disposals of more non-core assets, just like last year.

“It is yet to be seen. We will recognise the land sale in Seberang Perai Utara in the third quarter of this year. We will continue to look at restructuring the group by disposing of non-core assets,” he said.

He was referring to Boustead Plantations Bhd’s proposed sale of five adjoining freehold plots in Seberang Perai Utara, Penang, measuring 677.78ha in all, to a subsidiary of S P Setia Bhd for RM620.1 million. Boustead Plantations would gain some RM526 million from the sale.

For the plantation business, Lodin said if crude palm oil price remains at RM2,600 to RM2,700 per tonne, the group will enjoy an attractive margin as its production cost per tonne was RM1,600.

On its property development sector, which was the group’s main earnings driver last year, he said the group’s projects will continue to attract interest given their strategic locations, and cited the group’s township development Mutiara Rini in Skudai, Johor, and its high-end condominium One Cochrane in Kuala Lumpur, as examples.

The total gross development value of the group’s ongoing and new launches now stood at RM991 million.

On whether the group intends to spin off its investment properties and list as a real estate investment trust, Lodin did not discount that possibility, though it wouldn’t happen in the near term. The group has eight hotels, several office buildings and shopping complexes.

As for its shipbuilding business, which turned around last year, Lodin said the RM7.5 billion orders it had secured so far can last it up to seven years.

Lodin also said Boustead plans to open 15 to 20 BHPetrol stations this year and add convenient stores to its existing petrol stations to bring in more income.

Boustead has earmarked RM700 million for its capital expenditure this year, mainly to fund the construction of the Nucleus Tower in Mutiara Damansara, the development of the Royale Chulan Cherating, as well as to partly finance some of the new BHPetrol stations.

Boustead’s FY16 net profit grew 28-fold to RM369 million, from RM13.2 million in FY15, though revenue slid 3% to RM8.37 billion, from RM8.66 billion.

This article first appeared in The Edge Financial Daily, on April 7, 2017.

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from TheEdgeProperty.com http://www.theedgeproperty.com.my/content/1114459/boustead-sees-better-earnings-economy-picks

Tourism tax will affect hotel segment — KLCCP

KUALA LUMPUR (April 7): The new tourism tax bill that was just passed is expected to affect KLCCP Stapled Group, which owns Mandarin Oriental Kuala Lumpur Hotel that is already facing a challenging environment.

“We are not overly optimistic about the market, especially with the incoming additional taxes. Let’s not forget that we have the minimum wage imposed. All of these will affect the hotel segment,” he said.

Group’s chief executive officer Datuk Hashim Wahir noted that there will be expectation of the government to provide better facilities given the implementation of tourism tax.

With the hotel industry already facing a big challenge in terms of pricing given the existing competition and overall occupancy, this would be an additional pressure on hotel operators.

“Occupancy rate for Mandarin Oriental was around 47% last year and is expected to remain stable,” he said, despite the expectation of more tourists in Malaysia this year.

According to Hashim, the hotel segment’s contribution to the group’s revenue declined to 11% in the financial year ended Dec 31, 2016 (FY16) from 12% in FY15, mainly due to significant impact by the softer corporate demand, increased competition from luxury and boutique hotels coupled with renovations to the guest rooms.

With the already challenging environment for its hotel segment, the tourism tax will only be an additional hurdle for its business.

This article first appeared in The Edge Financial Daily, on April 7, 2017.

from TheEdgeProperty.com http://www.theedgeproperty.com.my/content/1114454/tourism-tax-will-affect-hotel-segment-—-klccp

Suria KLCC expects to keep occupancy rate at 96%

KLCCP Stapled Group

KUALA LUMPUR (April 7): KLCCP Stapled Group is currently in the midst of negotiating with a potential tenant to take up 40% of Menara Exxon-Mobil which is vacant. The group is targeting at completing the negotiation in the next two months.

Speaking at a press conference yesterday, the group’s chief executive officer, Datuk Hashim Wahir, said that the management has identified a single tenant in the IT industry servicing the oil and gas (O&G) players to take up the vacant office space in Menara Exxon-Mobil.

“We are working on this and we hope to get it done within the next one to two months,” Hashim said.

Exxon-Mobil has signed a long-term lease agreement with the group for Menara Exxon-Mobil but will only take about 60% as compared with the previous 100% after the lease expired at end-January this year.

“It is known that we basically benefit from long-term tenancies in particular with Petronas for the Petronas Twin Towers and Menara 3 as well as Menara Dayabumi. This is the home for Petronas and the O&G. We will continue to ensure that our tenants are satisfied with our services and the state of our properties.

“That’s why our management services become very strategic in ensuring our tenants are retained,” Hashim said.

Besides that, the office segment also saw the completion of the conversion of the atrium spaces of level two to five of Menara Dayabumi, which provided additional office space of about 43,000 sq ft, which was added into the existing Triple Net Lease Agreement with Petronas.

At the back of locked-in long-term tenancies with high-quality tenants for its office segment, the management expects the office segment to remain stable. In its latest financial results ended Dec 31, 2016 (FY16), the office segment remained the major contributor to the group’s revenue with contribution of 44%.

The retail segment comprising Suria KLCC and the retail podium of Menara 3 Petronas is also expected to remain stable in FY17 after it retained its 35% contribution to KLCCP Stapled Group’s revenue.

Hashim shared that Suria KLCC is expected to maintain its occupancy rate at 96% for FY17, similar to what was seen in the last financial year. This was however a decline from the retail segment’s occupancy rate at 98% in FY15.

When questioned on the reversion rate and rental yield as well as its outlook for FY17, he said that the retail segment has a reversion rate at a range of 2% to 5%.

“Our rental yield is reflected by the valuation that we have. In fact, there’s a slight increase in fair value at around 6.5% for last year,” he added.

Hashim, however, stressed that the management’s priority is not on the reversion rate but to focus on rebranding and finding the right mix of tenants to better reflect current shopping trends and pave the way for newer brands.

“We are now able to see that actually every year; we will have one-third of the tenants in Suria KLCC up for review. That would give us the opportunity to rebrand and that’s what we are doing right now. We are trying to reposition to the luxury men’s and women’s zones on level 1, on top of the ground floor, which is the traditional level,” he said.

When asked what could be the driver of growth for KLCCP Stapled Group in FY17, Hashim said that the management expects a stable performance across all segments.

KLCC Property Holdings Bhd and KLCC Real Estate Investment Trust, collectively known as KLCCP Stapled Group, are Malaysia’s largest self-managed stapled security that invests, develops, owns and manages a stable of iconic and quality assets.

As of closing, the group’s share price slipped by 0.13% to RM7.85, giving it a market capitalisation of RM14.2 billion. It is currently trading near its record-high level.

This article first appeared in The Edge Financial Daily, on April 7, 2017.

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from TheEdgeProperty.com http://www.theedgeproperty.com.my/content/1114451/suria-klcc-expects-keep-occupancy-rate-96

Upholding brand and reputation with professional management

STRATA MIXED CATEGORY — SILVER

SOLARIS MONT’KIARA

Solaris Mont'Kiara

IT was a sunny Monday afternoon when Henry Butcher Malaysia (Mont’Kiara) Sdn Bhd executive director Low Hon Keong and Solaris Mont’Kiara’s Management Corporation (MC) chairman Sivam Kandiah met up with TheEdgeProperty.com at Dal.Komm Coffee outlet at Solaris Mont’Kiara, Kuala Lumpur.

“We suggested meeting up here for a few reasons — to show support for our tenants. We always host meetings with business partners at our tenants’ shops to let them feel the vibrant environment and atmosphere we have here at Solaris Mont’Kiara. It is also a chance for us to check if everything is in order and to see if the tenants have any complaints or anything to tell us but are too busy to pop-in at the management office,” says Sivam.

Solaris Mont’Kiara won the Silver at the TheEdgeProperty.com Malaysia’s Best Managed Property Awards 2017 in the strata mixed development category.

Developed by UEM Sunrise Bhd and delivered in December 2007, Solaris Mont’Kiara is a commercial development along Jalan Duta Kiara in Mont’Kiara.

Developed in two phases, phase 1 consists of rows of 3- to 5-storey shopoffices while phase 2 is an L-shaped business hub that comprises three blocks of 8- to 10-floor office suites (274 units), a 2-storey retail podium (72 units) and a 4-storey basement car park with 1,600 parking bays.

Henry Butcher took over the property management of the business hub (phase 2) in July 2016 when it was appointed by the MC, to replace the previous one.

“Our greatest challenge is that Solaris Mont’Kiara is well-known so we have to make sure it runs well because it will have a direct impact on the reputation of Henry Butcher otherwise,” says Low.

“It is never an easy move to change the property management company because the committee will need to go through a long process to find the right one and the transition process is often long and complicated,” says Sivam.

However, the management committee concluded that Solaris Mont’Kiara deserves to be managed better and many things need to be improved. At its annual general meeting (AGM) held in July last year, the resolution to terminate the previous property management company was passed smoothly. “The new team has proven that it was the correct decision. They have achieved a lot over the past eight months,” says Sivam.

Sivam and Low

Henry Butcher conducted a comprehensive building audit to pinpoint upgrading works that were needed, including upgrading the CCTV system as well as freshening up the façade of its buildings, part of a RM1.6 million façade revamp project.

“If you notice, there is no proper covered drop off point in this L-shaped building. To provide convenience to customers while giving a lift to the look of this mature development, the team and the MC hired an architect to put in the new drop off point. It will roughly cost us RM1.6 million. This revamp project will be discussed this coming AGM in June,” offers Low.

The safety issue

Solaris Mont’Kiara is a vibrant nightspot and safety is often the main concern of its tenants.

“We will not deny that we do have a handful of club and pub tenants. I must say they are one of the nicest tenants who give us very good cooperation. What is beyond our control are the customers,” Low shares. It therefore works closely with the police through the Mont’Kiara Consultative Council (MKCC). MKCC is a body comprising residents’ associations, management corporations and joint management bodies in the Mont’Kiara vicinity. It has established a relationship with Dewan Bandaraya Kuala Lumpur (DBKL) as well as the police in maintaining the safety inMont’Kiara area.

Besides that, the management team is also trying to find a solution to the traffic congestion during peak hours at Solaris Mont’Kiara.

“We may decide to enlist the help of the traffic police to ease traffic flow during peak hours but for a long-term solution, we will have to review the traffic system of the entire Mont’Kiara,” Low says.

Indeed the MC and Henry Butcher aim to make Solaris Mont’Kiara a pleasant place to work and play. The MC has even taken the effort to paint the road kerbs on Jalan Solaris and assign cleaners to maintain the surroundings just so visitors feel welcomed even before they reach Solaris Mont’Kiara. “To be honest, this is not part of our job but we do not mind doing more than what we should because we want visitors to Solaris Mont’Kiara to feel welcomed once they turn into Jalan Solaris,” Sivam says.

Low likens property management to “a housewife’s job”.

“As the property manager, you have to take care of every single little thing in the development. From the brand of the toilet paper to advice on legal issues, the property management team is the one who solves the problem,” he says. However, he adds, it is also a job that one derives a lot of satisfaction from.

In conclusion, Sivam says: “Property management plays an important role in the upkeep of a place so that it continues to create value for owners, tenants, as well as the area in which it is located”.

Project details

 

Sustainability — the hallmark of a good development

UEM Sunrise Bhd developed Solaris Mont’Kiara as a mixed-strata development in the prestigious Mont’Kiara enclave to cater to the needs of those living in the vicinity.

“The development boasts a comprehensive and diverse offering of office and retail spaces targeted at urban city dwellers. Formerly marketed and known as SohoKL, UEM Sunrise is proud to have built an award-winning project that has become essential in supporting a community of working professionals and residents in the area,” says UEM Sunrise managing director and CEO Anwar Syahrin Abdul Ajib when asked to comment on Solaris Mont’Kiara’s success as the Silver winner in the strata mixed development category at TheEdgeProperty.com Malaysia’s Best Managed Property Awards 2017.

Even though UEM Sunrise is only responsible for the maintenance until a Joint Management Body (JMB) or Management Corporation (MC) has been established, the developer continues to look for ways to add value and to improve the quality of life of the residents living within its developments.

“As a developer whose core value is sustainability, we are committed to supporting the community of residents within each of our developments by providing them with an array of lifestyle amenities, commercial opportunities and others, even after a property development has been completed or after the project has been passed to the JMB/MC,” Anwar notes.

Elaborating on the 10-year-old Solaris Mont’Kiara’s success at the first of its kind Awards in Malaysia, Anwar says a good property development is more than a well-designed building.

“For us, the hallmarks of a good development include the development’s ability to stand the test of time. We hope that this award will continue to inspire the industry to grow towards developing global best practices together”.

TEPBMA2017

For more stories on the Awards, click here.

This story first appeared in TheEdgeProperty.com pullout on April 7, 2017. Download TheEdgeProperty.com pullout here for free.

from TheEdgeProperty.com http://www.theedgeproperty.com.my/content/1114287/upholding-brand-and-reputation-professional-management