Naza TTDI's next step is to get listed

By Sharen Kaur
sharen@nstp.com.my
Published in NST on October 27, 2011


KUALA LUMPUR: After launching its biggest property project so far, Naza Group is aiming to list its property unit on the local stock market in about three years.

Naza TTDI Sdn Bhd's initial public offering (IPO) is also expected to be among the largest property IPOs on Bursa Malaysia, joint group executive chairman SM Nasarudin SM Nasimuddin told Business Times.


"Now that we have launched KL Metropolis, the next step is to take Naza TTDI to new heights and to do that, we will need the IPO," he said on Tuesday after the launch of the project by Minister of International Trade and Industry Datuk Seri Mustapa Mohamed.

Business Times first reported that Naza TTDI wanted to list in 2008 but this was postponed due to weak market conditions and also because it wanted to build its asset base.

It had hired CIMB Investment Bank Bhd to arrange the IPO and planned to raise more than RM1 billion.
"With the KL Metropolis development, Naza TTDI is a step closer to becoming a sizeable property group," Nasarudin said.

Naza Group, founded by the late Tan Sri Nasimuddin Amin in 1974, is well-known as an automotive player. It ventured into property development by acquiring Naza TTDI more than five years ago.

Meanwhile, Naza TTDI is well-known for the development of Taman Tun Dr Ismail in Kuala Lumpur.

KL Metropolis is currently the single biggest integrated mixed development in Kuala Lumpur for Naza TTDI and piling work has started.

The RM15 billion development is almost four times bigger than Naza TTDI's ongoing Platinum Park project in the Kuala Lumpur city centre, which is worth RM4 billion.

KL Metropolis will have 18 40-storey office and residential towers, a 100-storey building and three hotels, as well as the new one-million-sq-ft Matrade centre and two retail centres with more than two million sq ft of space.

KL Metropolis expected to woo RM3.5b foreign investments

By Sharen Kaur
sharen@nstp.com.my
Published in NST on October 27, 2011

KUALA LUMPUR: The Naza Group's KL Metropolis project is expected to lure foreign investments of some RM3.5 billion over its 15-year development period.

Foreign companies may invest that amount to build properties, either on their own or in partnership with Naza TTDI Sdn Bhd, the property arm of Naza Group.

"While we can build the structures on our own, we want to give opportunities to others for transfer of technology and expertise," Naza TTDI group managing director SM Faliq SM Nasimuddin said af-ter the project's launch on Tuesday.

The RM15 billion project is located next to the existing Matrade building off Jalan Duta and is touted as a new business district.
It will feature 22 office and residential towers, which include a 100-storey building and three hotels, as well as the new one million sq ft Matrade centre and two retail centres with more than two million sq ft of space on 30 hectares.

Launched by Datuk Seri Mustapa Mohamed, the Minister of International Trade and Industry (Miti), the project will be developed in three phases.

Phase 1 will comprise the exhibition centre, two residential towers, two hotels, two office towers and a retail centre, worth a combined RM6 billion.

Faliq said tenders to cons-truct the buildings will be called next month. It has appointed a local contractor to do the piling work.

Naza TTDI will borrow from banks and use internal funds for the initial stages of development, after which it may raise more money from a bond sale. The company is expected to invest RM500 million on infrastructure alone.

"We aim to complete Phase 1 by 2014/2015," he said.

Naza TTDI is already in talks with several foreign investors to build the retail and com-mercial properties in a joint venture.

It is also in discussions with a few five-star international hotels and mall operators to manage some of its properties.

"We are seeking five-star hotel operators and good retail partners for the project. We want to make this a world-class business and tourist destination," Faliq said.

Naza TTDI will announce several deals before the end of this year or early next year.

Faliq said Phase 2, which will start in 2015, will have five residential towers, three office blocks, a boutique hotel, a healthcare centre and the 100-storey building, worth RM4 billion.

Phase 3, worth RM5 billion, will start in 2019, consisting of three residential towers, three office buildings and a retail centre, he added.

“We have attracted a lot of local and foreign interest for this project, repositioning Malaysia on the world map. We expect several en bloc deals coming in,” Faliq said.

KL Metropolis is designed to Malaysia’s Green Building Index requirement and is also the first registered LEED for Neighbourhood project in Malaysia.

The LEED certification is an internationally-recognised green rating system that incorporates the principles of smart growth, urbanism and green building.

Boustead project called off

By Marina Emmanuel and Sharen Kaur
Published in NST on October 18, 2011


George Town: The Penang state government has cancelled a plan to allow Boustead Holdings Bhd (BHB) to reclaim up to 0.16 hectares of land off the Penang Bridge.



Boustead was initially given the rights as part of compensation package for agreeing to scale down a hotel development project in the state's heritage zone.

A statement from Chief Minister Lim Guan Eng's office, obtained by Business Times yesterday, noted the decision was made following public consultation and a legal notice sent by Boustead to a state assemblyman who was defending his constituents in the affected area.

"After much public consultation, the Penang State Government has taken cognisance of the views of the residents of Putra Marine, Gold Coast and Bay Garden and decided not to pursue the land reclamation at Bayan Bay to Boustead.

"To pursue the land reclamation deal with Boustead under the shadow of the legal notice of defamation sent by Boustead to (Pantai Jerejak) assemblyman Sim Tze Sin is wholly inappro-priate," Lim said in the statement.


"Boustead will still be required to comply with the World Heritage building height control of 18 metres within the heritage core zone of George Town.

"The form of compensation to be paid and whether it should be paid," Lim added, "is still subject to further negotiations with Boustead".

Boustead was in the midst of constructing a one-block 300-room Royale Bintang Hotel in George Town's heritage zone in 2009, when works were halted following reports the development could place George Town's heritage status in jeopardy.

Boustead is one of four developers who have been singled out for undertaking projects exceeding the height restriction in the heritage city's buffer and core zone.

The others are Asian Global Business (AGB) Sdn Bhd, Eastern & Oriental Sdn Bhd and the Low Yat Group.

All the firms had approval from the Penang Island Municipal Council for projects exceeding the 18m limit, well before George Town was placed on the World Heritage List in July 2008.

Last year, Boustead said it was seeking compensation from the Penang state government for agreeing to reduce the height of its proposed hotel. It is learnt that the company had sought RM20.8 million as compensation.

A Boustead spokesman, meanwhile, said the company was waiting for the state government to make a decision on the compensation.

"They have to pay us either in the form of land reclamation or cash reimbursement. They have to make a decision as to how to pay us, so we can recover the money we have spent," the Boustead official said.

The spokesman did not divulge the amount spent by Boustead on its hotel project, except to say that they had completed between 10 and 15 per cent of work so far.

Gadang beefs up ops

By Sharen Kaur
Published in NST on October 15, 2011
KUALA LUMPUR: Gadang Holdings Bhd is beefing up its construction activities and eyeing several contracts under the Economic Transformation Programme (ETP) including hospital projects to improve earnings.

Managing director and chief executive officer Tan Sri Kok Onn said the company is bidding for contracts worth about RM1.5 billion.

"We are interested in working on hospital projects. We want to build on our expertise and hopefully, do similar projects overseas," he told Business Times in an interview recently.

In 2008, Gadang's unit, Gadang Engineering (M) Sdn Bhd (GESB), won a RM341.9 million turnkey contract for the Rehabilitation Hospital (formerly, Lady Templer) in Cheras, Kuala Lumpur.

Just this week, GESB won a RM411 million contract from the Public Works Department to complete the abandoned 300-bed Shah Alam Hospital.

The Shah Alam hospital project was mooted some 12 years ago at a cost of RM300 million to ease overcrowding in the nearest government hospital for Shah Alam residents, the Tengku Ampuan Rahimah Hospital in Klang.

The project was sub-contracted to GM Healthcare Sdn Bhd by its then main contractor, Sunshine Fleet Sdn Bhd in 2007, when its first sub-contractor, Isyoda Corp Bhd, withdrew from the project.

Sunshine Fleet is owned by Selangor princess Tengku Putri Arafiah Sultan Abd Aziz Shah and it won the contract via direct negotiations in 2007 for RM482 million.

The project, expected to be completed in 2009, was stalled after GM Healthcare filed a lawsuit against Sunshine Fleet for failing to pay the company.

The works ministry revoked Sunshine Fleet's contract and called for a new tender exercise in July last year to identify a "white knight" for the job.

Six companies were shortlisted, including Gadang, IJM Corp Bhd, Fajar Baru Capital Bhd, Limbungan Setia, Ahmad Zaki Resources Bhd and Gamuda Bhd.

Meanwhile, among the contracts Gadang is bidding for is the Sungai Buloh-Kajang line of the Mass Rapid Transit project.

Kok Onn said GESB had been pre-qualified in all of the three open categories for the MRT.

He said Gadang will tender for several works, including elevated civil works and elevated stations with five packages each, and construction of a depot.

For the year ended May 31 2011, Gadang posted revenues of RM348 million and a net loss of RM4.2 million. The loss was mainly due to non-recurring write-off of bad debt, amounting to RM9.45 million in the engineering division.

Gadang's profitability was also stifled by costlier building materials.

Minor blips

By Sharen Kaur
Published in NST on October 13, 2011
KUALA LUMPUR: Malaysian companies with operations in Thailand may face a blip in earnings in the current quarter due to the worst floods in well over half a century in the kingdom, analysts say.

Thus far, Notion VTec Bhd, Eng Teknologi Bhd and Fraser & Neave Holdings Bhd have announced temporary closures of their respective facilities due to the floods .

They said the flood had forced the halt of their operations, but the extent of the damage has yet to be ascertained.

Bina Puri executive director Matthew Tee Kai Woon told Business Times that it is business as usual for the company, which has construction contracts worth more than RM50 million in Bangkok.

"Despite the chaos, we have not stopped work and we do not think the situation will have any impact on our earnings," he said.

Mercury Securities head of research Edmund Tham said here yesterday that the impact will be small as Thailand is not a significant earnings driver, contributing just under 10 per cent to some of the companies' earnings.

"The floods have affected the supply chain for manufacturers and logistics firms with railroad and truck services being halted.

"We would like to think the worst is over but there is another tropical storm coming, which may affect Bangkok, where most Malaysian companies are located," he said.

Mercury Securities is maintaining its earnings forecast on Malaysian firms with businesses in Thailand.

"We are more concerned about Europe and the US as it affects global trade," Tham told Business Times.

Floodwaters have ravaged 60 of Thailand's 77 provinces over the past two months, forcing operations of over 500 factories, including those operated by Nidec Corp, Honda Motor Co and Canon Inc, being suspended, with some facing shutdowns for as long as three months.

OSK Investment Bank, however, is reiterating its underweight stance on the technology sector pending affirmative indications of the quantum of damages suffered by the companies.

"The situation prompts us to take a look at the hard-disk drive (HDD) component makers under our coverage, all of which have a presence in Thailand, to gauge the potential impact on the sector should the floods worsen.

"In view of the weakness in the end-consumer demand for HDD amid rising demand for solid-state drives, the latest production woes are likely to aggravate the situation. Hence our cautious stance stays," the research house said.

Subsequently, Maybank Research downgraded Notion VTEC, one of the HDD players which had to shut down, for the time being, its Thailand operations, to a "hold" from the "buy" recommendation previously.

Maybank's 12-month price target for Notion VTEC is now RM1.50 a share.

Affin Investment Bank head of research Andy Ong said any disruption in Thailand is temporary and will not be very severe to the business.

"In Japan's case, it was a nuclear-tsunami thing. For Thailand, it is only flooding and when the water resides, business will be back to normal.

"For technology firms, I don't think the impact would be so severe as demand has been slowing down due to weak global trade," he said.

Institutional suitors for BRDB assets

By Sharen Kaur
Published in NST on September 28, 2011

KUALA LUMPUR: Bandar Raya Deve-lopments Bhd (BRDB) has received three offers from institutional investors for its key assets after its major shareholder had offered to buy them, company officials said.

BRDB will call for a tender by the end of this year or early next year, they said, adding that it will hire a consultant by the next board meeting.

"We can't disclose who the interested parties are as these are confidential matters. They are parties who invest in assets and securities," one of the officials said yesterday.

BRDB on Monday announced that it had decided to scrap a deal to sell four key assets and related liabilities to a major shareholder, Ambang Sehati Sdn Bhd, for RM914 million, and call for a tender instead.

"Expression of interest came after BRDB said it would accept the deal. After serious consideration, BRDB and Ambang Sehati decided to mutually terminate talks for the tender to take place," the official explained.

The official added that the investors, not related to BRDB, had expressed interest to buy the assets to its board members, including chief executive officer Datuk Jagan Sabapathy, about a week ago.

"Based on our directors' assessment of the interested parties, they decided it is worthwhile to engage in discussion with them and see what they offer," he told Business Times.

BRDB received the offer from Ambang Sehati on September 5 to buy Bangsar Shopping Centre (BSC), Menara BRDB, CapSquare Retail Centre in Kuala Lumpur and Permas Jusco Mall in Johor.

BSC and Menara BRDB are parked under BRDB's wholly-owned unit BR Property Holdings Sdn Bhd (BRPH).

Ambang Sehati is 26 per cent controlled by BRDB chairman Datuk Mohamed Moiz Jabir Mohamed Ali Moiz. He also has an 18.8 per cent stake in BRDB.

Two weeks later, BRDB told Bursa Malaysia that it had accepted the offer after taking into account the advice and opinion of its main adviser CIMB and independent adviser Public Investment Bank Bhd.

But there were concerns raised by various parties including analysts, the media and the Minority Shareholder Watchdog Group.

"They said there is no transparency in this deal as it is a related-party transaction. They also raised concerns that BRDB was accepting the deal at lower than the market value and it was not doing the right thing with how the money would be spent," the official said.

"The board did speak to several independent property consultants who said it was a fair deal looking at the 6 per cent yield. The board decided the best thing to do now is call for a tender," the official added.

At a media briefing last week to announce the deal, Jagan told reporters that BRDB did not receive any serious offers on the table, hence decided to take the offer made by Ambang Sehati.

Jagan also said that BRDB did not call for a tender as it would jeopardise the deal with Ambang Sehati.

ETP projects to spur expatriate demand for high-end homes

By Sharen Kaur
Published in NST on September 27, 2011

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.

House prices to rise, costlier materials blamed

By Sharen Kaur
Published in NST on September 27, 2011

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.

Rehda: More developers will invest overseas

By Sharen Kaur
Published in NST on September 27, 2011

KUALA LUMPUR: More Malaysian developers are expected to invest abroad to diversify their source of earnings and avoid tough industry rules at home.

"Increasing affluence would accelerate these outward investments," The Real Estate and Housing Developers' Association Malaysia (Rehda) president Datuk Seri Michael Yam Kong Choy said after Rehda's first half 2011 property update yesterday.

Recently, SP Setia Bhd said it is buying land in Melbourne, Australia, for RM81 million cash, its second foray into Melbourne.

Other developers that have been investing overseas include Berjaya Land Bhd, Lion Group, Sunway Group, PJ Development Holdings Bhd, WCT Bhd, Glomac Bhd and Gamuda Bhd.

Yam also said more individuals will invest in properties overseas as part of their portfolio diversification strategy.

In the last few years, property developers from Australia and the UK have been showcasing more of their products in Malaysia.

Yam also thinks that more regulations and legislation imposed by the authorities would accelerate such overseas investments.

Rehda vice-president and ex-chairman of its Selangor branch Mustaza Mohamad said there are too many laws governing the property sector in Malaysia.

"This is a very rigid industry. We need to have flexible policies. Whether the Ministry Of Housing And Local Government, Bank Negara Malaysia or state authorities, we need to know if the policies are good for us or not," he said.

Rehda council member and head of property operations at Sime Darby Property Bhd, Wan Hashimi Albakri, said Malaysia should be a more free market economy.

"Developers are pressured to sell cheaper houses. But in reality, there are no more cheap houses as the cost has gone up from 30-odd per cent to more than 80 per cent in the last few years.

"The government should be putting in more money in peoples' pockets. There should be more wealth creation. Banks also should take a haircut for those buying properties," he said.

On softer ground

By Sharen Kaur
Published in NST on September 24, 2011

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.