MKH strategy pays off

New landmark: An artist’s impression of Kajang 2. MKH’s property crown jewel is the 220-acre Kajang 2 flagship development, where more projects would be rolled out closer to the completion of the MRT in 2017.

PETALING JAYA: MKH Bhd’s focus on developing affordable homes will help the company continue to generate steady earnings despite the slowdown in the local property market.

AllianceDBS Research said in a report yesterday the company’s strong orderbook was testament that there was robust demand for affordable homes.

“Unbilled property sales had reached a record high of RM843mil as at March 2015, representing 1.6 times its 2015 (ending Sept 30) property revenue. We understand property sales had reached RM600mil as at June, and is on track to meet its 2015 target of RM850mil.

“This is largely driven by its focus on affordable homes, which remain popular with buy-to-stay homebuyers.”

The research house said MKH’s property crown jewel is the 220-acre Kajang 2 flagship development, where more projects would be rolled out closer to the completion of the Mass Rapid Transit (MRT) in 2017.

“We conservatively estimate the land alone to be worth over RM300mil,” it said.

AllianceDBS Research added that MKH’s property sales had been resilient over the past two years despite the slower market, thanks to its focus on affordable homes, in which the group has a good track record.

“MKH never employed the Developer Interest-Bearing Scheme when its peers introduced the incentive package in the past few years to attract buyers. This suggests the focus on affordable homes has helped to boost its sales.”

According to the research house, MKH still has about 1,400 acres of land bank, about half of which is located in the booming Kajang-Semenyih growth corridor and spurred by the development of the MRT connectivity.

“The land bank has generated more than RM10bil in gross development value and has underpinned earnings visibility for more than 10 years. However, MKH continues to actively scout for strategic land bank,” it said.

Separately, the research house said the company’s plantation business was already self-sustaining, adding that MKH had started servicing its US$85mil (RM323mil) borrowings since March.

“Thanks to the young tree profile, first-half 2015 fresh fruit bunch volume grew 41% year-on-year and helped to offset the impact of the low crude palm oil (CPO) price.

“A sustainable recovery of CPO prices will be a major catalyst for MKH because of the naturally high operating leverage for the plantation business,” it said.

For more information on Building and Construction event, please visit www.asiapacificevents.com

MRCB-Quill Reit Q2 profit jumps 59%

PETALING JAYA: MRCB-Quill Real Estate Investment Trust (MQReit) (formerly Quill Capita Trust) has recorded a net profit of RM13.632mil for the second quarter (Q2) ended June 30, 2015, a 59.2% jump from a year earlier due to recognition of the full-quarter income contribution from Platinum Sentral.

This was achieved on an 85.4% growth in revenue to RM32.175mil, attributed mainly to additional revenue arising from the RM740mil acquisition of Platinum Sentral in Kuala Lumpur in March, higher revenue from Plaza Mont’Kiara as well as rental rate increases for some properties.

Net property income soared 81.4% year-on-year to RM24.313mil for the quarter under review.

However, total expenditure more than doubled, resulting in a lower realised net income growth of 59.2%.

Finance costs of RM8.19mil and manager’s fee of RM2.1mil were incurred during the quarter, compared with RM3.57mil and RM1.35mil, respectively, in Q2 last year.

MRCB Quill Management Sdn Bhd, the manager of MQReit, attributed the larger finance costs mainly to interest on additional borrowings drawndown on March 30.

It also noted that property operating expenses were higher by 98.9% due to the purchase of Platinum Sentral and higher repair and maintenance expenses for Plaza Mont’Kiara.

MQReit has an income distribution policy of at least 90% of its distributable income at least semi-annually but the percentage and interval are at the discretion of the manager.

MQReit is proposing an interim income distribution of RM14.683mil or 2.22 sen per unit.

This is 95.33% of the realised income for the period from March 24 to June 30, 2015.

It is payable on Aug 28.

Combined with the interim dividend per unit of 1.88 sen for the Jan 1 to March 23 period, it is delivering a distribution per unit (DPU) of 4.10 sen for the first half-year – the same DPU as the corresponding period last year.

MQReit owns 11 buildings, comprising five in Cyberjaya, three in Kuala Lumpur, one each in Shah Alam and Petaling Jaya, and one in Penang, valued at RM1.588bil as at March 31.

For more information on Building and Construction event, please visit www.asiapacificevents.com

Tropicana to launch phase two of Tropicana Aman in August

The stunning new Tropicana Aman property gallery overlooking the lake.

PETALING JAYA: Tropicana Corp Bhd will launch the second phase of its mixed township development Tropicana Aman in Shah Alam next month.

In a statement, the property developer said the first phase of Tropicana Aman – called Arahsia Residences, which comprised 432 units of link homes, with a gross development value of RM342mil – had already been fully taken up since its launch in May 2015.

“Spanning 863 acres, Tropicana Aman is our biggest township development in Malaysia. It is also our first foray into Shah Alam,” Tropicana non-executive chairman Datuk Seri Mohamad Norza said at the opening of the group’s new property gallery in Tropicana Aman yesterday.

The new 12-acre property gallery is located on the development site at Bandar Tropicana Aman, next to the growing neighbourhood of Kota Kemuning in Shah Alam, it said in the statement.

It will also be promoting Tropicana Aman’s “Walking and Biking Community” concept.

For more information on Building and Construction event, please visit www.asiapacificevents.com

Berjaya Corp raises stake in Berjaya Kyoto’s RM1.05b Japan project

KUALA LUMPUR: Berjaya Corp Bhd will advance over RM152mil to Berjaya Kyoto Development (S) Pte. Ltd (BKyoto) and subscribe for a 50% stake in the latter which is undertaking a billion-ringgit property project in Kyoto, Japan.

Under the corporate exercise, BCorp said on Tuesday it was subscribing for the 50% stake in the enlarged paid-up of BKyoto for S$34.66mil cash (RM97.28mil) cash.

BCorp would then advance up to RM152.74mil to the BKyoto Group for the purposes of working capital and proportionate settlement of the inter-company loan with Berjaya Land Bhd.

BKyoto is undertaking a commercial development in Kyoto with a estimated development cost of 33.69bil yen (RM1.05bil).

The group is involved in developing resort hotel and residences. It owns five acres of freehold land about 2km from the Kyoto station, the main transportation hub for Kyoto.

The BKyoto Group is developing the said land into a commercial development comprising a 123-room hotel and 57 units of residences known as the Four Seasons Hotel & Residences.

The estimated development cost (inclusive of the land) of about 33.69bil yen (RM1.05bil).

The Four Seasons Project will be managed by Four Seasons Hotel, Inc. and is expected to be completed by the third quarter of 2016. Presently, about 45% of the construction works of the Four Seasons Project has been completed.

BCorp said the proposed subscription of S$34.66mil was based on the adjusted unaudited net assets of the BKyoto Group, the open market valuation of the Four Seasons project of 36.50bil yen (RM1.14bil) and potential earnings of the Four Seasons project.

“The proposals will provide an opportunity for BCorp to invest directly and own the Four Seasons Project, an iconic luxury hotel and residences in Japan thereby increasing its landbank and portfolio of the properties owned which also include the luxury residences ‘The Ritz-Carlton Residences’ in Malaysia to be marketed and managed by Ritz-Carlton Hotel,” it said.

For more information on Building and Construction event, please visit www.asiapacificevents.com

UOA Q2 revenue up 4%

PETALING JAYA: UOA Real Estate Investment Trust’s revenue for its second quarter ended June 30, increased 4.6% to RM23.15mil from RM22.13mil a year ago.

Net profit for the quarter was up by 2.7% to RM11.85mil from RM11.54mil a year earlier.

It has announced a dividend of 2.69 sen, bringing the total dividends announced for the financial year to 5.32 sen.

For the first half of the financial year ending Dec 31, 2015, topline was 4% higher at RM45.94mil year-on-year.

Earnings rose marginally to RM23.94mil from RM23.71mil.

“Against the six months ended June 30, 2014, gross rental has improved by 4% due to a revision in rental rates and steady occupancy rates of the investment properties,” it said.

However, higher operating and borrowing costs had offset the higher rental revenue.

Realised income before tax and distributable income was RM11.98mil.

“Taking into consideration a 95% distribution, the trust has set aside RM11.39mil as provision for distribution,” it added.

In a separate announcement, it said its public spread as at June 30, 2015 was 23.36%, which did not fully comply with Bursa Malaysia’s requirement.

For more information on Building and Construction event, please visit www.asiapacificevents.com

BCorp buys 50% stake in BLand’s Japan project for RM97.3mil

PETALING JAYA: Berjaya Corp Bhd (BCorp) is buying a 50% stake in Berjaya Kyoto Development (S) Pte Ltd (BKyoto) for RM97.3mil.

The seller of the stake is its 58%-owned Berjaya Land Bhd (BLand). After selling half of BKyoto to its parent, BLand will own the remaining 50%.

BCorp will undertake to advance up to RM152.74mil to BKyoto for the purpose of working capital and proportionate settlement of the inter-company loan with BLand.

Resort hotel developer BKyoto owns a five-acre parcel of freehold land, which is 2km from the Kyoto station. The land is also close to tourist attractions.

The Singapore-based firm is developing the land into a commercial project with 123 hotel rooms and 57 residences known as the Four Seasons Hotel & Residences. The project has a gross development value of RM1.05bil, with completion slated for the third quarter of 2016.

Some 45% of the construction work there has been completed.

BCorp said the proposal would provide an opportunity for it to invest directly and own the Four Seasons Project, an iconic luxury hotel and residences in Japan, thereby increasing its landbank and portfolio of the properties owned. In Malaysia, the conglomerate owns the luxury residences “The Ritz-Carlton Residences” to be marketed and managed by Ritz-Carlton Hotel.

BLand said it could reposition its financial resources and commitments to other property projects from the sale.

BLand would gain RM147.9mil from the sale.

BCorp did not expect any material effect on its earnings, net assets and gearing for the financial year ending April 30, 2016.

“However, the proposals are expected to contribute positively to the future earnings of the BCorp Group upon completion of the Four Seasons Project,” it said.

For more information on Building and Construction event, please visit www.asiapacificevents.com

Gamuda, IJM Corp, E&O top buys for exposure to Penang

KUALA LUMPUR: Affin Hwang Capital Research has Gamuda, IJM Corp and Eastern and Oriental (E&O) as its top Buys for infrastructure and property exposure to Penang.

It said on Monday Penang was forging ahead with development through public-private partnership (PPP) projects.

The RM27bil Penang Transport Master Plan (PTMP) is the largest PPP project, which is expected to be awarded by September.

“Construction/infrastructure and property companies are potential beneficiaries of the PTMP project. Top BUYs for exposure to this theme: Gamuda, IJM Corp and E&O,” it said.

Affin Hwang Capital Research said the Penang state government was pushing for the economy to move up the value chain by encouraging knowledge-intensive and innovation-led manufacturing and services.

Temasek’s proposed joint venture with Penang Development Corp (PDC) to develop a business processing outsourcing (BPO) centre and an international technology park in Penang with estimated gross development value (GDV) of RM11.3bil is a feather in the cap for the state in attracting new foreign direct investments (FDIs).

The jobs created from new investments would support population growth and long-term property demand in Penang. This has attracted property development companies such as E&O, Eco World and Ewein to embark on new largescale mixed development projects in the state with total GDV of RM60bil.

E&O has the highest exposure to Penang with property development projects in the state comprising 77% of its GDV of RM34bil.

“The state government is aware of the potential infrastructure bottlenecks that would be created by the rapid development of new industries and population growth. The proposed RM27bil PTMP should cater to the infrastructure needs of the state up to 2030.

“Six consortiums have submitted bids to be the project delivery partner (PDP) for the PTMP and a decision is expected by September,” it said.

“We believe Gamuda (will likely be appointed the PDP for the project. Being one of the largest contractors in Penang, IJM Corp is expected to win a substantial portion of construction work for the PTMP,” it said.

Affin Hwang Capital Research said the Penang state government has shown its commitment and dynamism to drive the long-term economic growth of the state.

Despite limited funding support from the federal government, the state government’s effort to work together with the private sector through PPP initiatives should support long-term infrastructure development of the state.

The research house said it likes E&O for the deep value of its assets, especially the STP2 project, and the potential unlocking of value once reclamation work starts by 4Q15. The stock’s current Price/RNAV of 0.4 times is below the Malaysian property sector average Price/RNAV of 0.6 times.

“We recommend a BUY on E&O with a 12-month target price of RM2.62, based on a 40% discount to RNAV/share of RM4.37,” it said.

It also said Gamuda was a core holding for exposure to the large-scale infrastructure projects being implemented in Malaysia, such as the Klang Valley MRT. Its potential appointment as PDP for the PTMP would provide another large-scale project to support Gamuda’s long-term earnings growth trajectory.

“Gamuda is our top BUY in the Malaysian construction/infrastructure sector. Our RNAV-based target price is RM5.65, excluding the PTMP project. Conservatively, we estimate that the PTMP project would enhance Gamuda’s RNAV/share by RM0.12 if secured,” it said.

As for IJM Corp, Affin Hwang Capital Research said the company has good earnings visibility and growth prospects with a record construction order book of RM7bil comprising mainly the West Coast Expressway and the Kuantan Deepwater Terminal projects.

IJM Corp’s RM6.5bil The Light Waterfront project in Penang with remaining land bank of 123 acres would benefit from improved connectivity with implementation of PTMP.

The research house said the proposed LRT linking Tanjong Bungah to Bayan Lepas is expected to pass through The Light Waterfront project.

“IJM will potentially win construction contracts in the PTMP and grow its land bank in Penang via land swaps. We believe IJM will potentially pay a special dividend in FY16, funded by proceeds from the sale of Indian Highway assets and a piece of land at The Light Waterfront project. We have a BUY rating on IJM with an RNAV-based target price of RM8,” it said.

For more information on Building and Construction event, please visit www.asiapacificevents.com