Eversendai bags RM113m Mideast deal

By Sharen Kaur
Published in NST on August 26, 2014

EVERSENDAI Corp Bhd’s strategy to adapt to changes has resulted in the company winning another Mideast contract, says executive chairman and group managing director Tan Sri AK Nathan.

The company, which provides specialist engineering and construction services, has won a RM113 million Khalifa Olympic Stadium contract.

The deal brings the total amount of new jobs secured this year to RM1.1 billion and the company’s current order book to RM1.7 billion.

“Our strategy of adapting to the ever evolving global economy is a result of staying focused on our set of core values of quality and safety, on time delivery and total client satisfaction,” said Nathan.

Nathan, who controls 71.37 per cent of Eversendai, said the winning of the contract reaffirms the confidence in the company and strongly reflects on its excellent reputation and progress in one of the most dynamic regions in the world.

Eversendai has been entrusted with the total renovation of this signature stadium, which was built in 1976 and initially upgraded in 2004 for the Asian Games.

The job comprises re-engineering and dismantling of the existing lighting arch and ancillary steel structures; and engineering, supply, fabrication and construction of steel structures.

Nathan said works on this landmark structure will allow Eversendai to showcase its engineering expertise and innovative construction methodologies, hence paving the way to win other stadium projects, especially in Qatar.

Eversendai is currently undertaking several other significant projects locally, in the Mideast and India.

“We will continue to register our brand in the global sector through adaptability and prudent management, and take great pride in flying the Malaysian flag high in this part of the world,” Nathan said.

High Speed Rail for 70pc less

By Sharen Kaur
sharen@mediaprima.com.my
Published in NST on August 25, 2014
RM12b ALTERNATIVE: Group plans to use KTMB infrastructure and integrate system with EDTP, sources say

A GROUP of local companies says it can build the high-speed rail (HSR) link from Kuala Lumpur to Johor Baru for about 70 per cent less that the current estimate.

People with knowledge on the matter said the companies plan to use existing Keretapi Tanah Melayu Bhd (KTMB) infrastructure between Kuala Lumpur and Johor Baru that covers around 350km, and integrate the system with the electrified double-tracking project (EDTP).

Malaysia has spent close to RM22 billion to develop the EDTP between Rawang, Selangor, and Gemas, Negri Sembilan. There is a plan to extend the EDTP from Gemas to Johor Baru for an additional RM8 billion to RM10 billion.

“The KTMB infrastructure is designed for 160kph. If you have high-speed trains running at 160kph between Kuala Lumpur and Singapore, you can make the trip in around two hours and 30 minutes.

“Instead of building a new alignment, the group plans to use the existing infrastructure and buy high-speed trains. This can be done by using the existing KTMB metre gauge, with some minor upgrading required.

“It estimates that the whole project would cost around RM12 billion, which will include acquiring 30 six-car train sets for about RM1.5 billion, based on current ridership for service every hour,” sources said.

The source said that if the government accepts the proposal, the group is ready to start construction as it has the funding in place.

At present, it takes up to eight hours by train between the two cities, around five hours by road, and 45 minutes by flight.

According to Business Times reports, the proposed HSR link between Kuala Lumpur and Singapore is aimed at cutting travel time between the two cities to 90 minutes.

New alignments had been proposed, which included land acquisitions, relocation of squatters, and cutting through hilly areas.

According to Land Public Transport Commission, the rail service is expected to have stops in Seremban (Negri Sembilan), Ayer Keroh (Malacca), and Muar, Batu Pahat and Nusajaya in Johor.

It is estimated that the plan would cost around RM40 billion, with RM10 billion alone to buy high-speed bullet trains.

Four groups are eyeing the HSR project.

MMC Corp Bhd may rope in Chinese and European system integrators, while YTL Corp Bhd and the China Infraglobe-Global Rail Sdn Bhd consortium are also in the running.

Government’s investment arm Khazanah Nasional Bhd is also keen and its involvement could be via UEM Group Bhd.

‘KTMB privatisation likely to damage the business’

By Sharen Kaur

sharen@mediaprima.com.my

Published in NST on August 23, 2014

KUALA LUMPUR: Privatising assets owned by Keretapi Tanah Melayu Bhd (KTMB), Malaysia’s largest train company, will cause more damage to the business, says Railwaymen’s Union of Malaya (RUM).

RUM president Abdul Razak Md Hassan said although KTMB is currently loss-making, there are many ways to turn around the company.

This includes boosting the revenue for cargo, intercity and commuter through effective marketing and promotion, and selling advertising space at trains and stations, he said.

“The government is forgoing the future earnings of KTMB if it accepts MMC Corp Bhd’s plan to privatise the cargo unit. KTMB would no longer receive income stream from the unit, which is  its only profitable business”.

Business Times reported recently that MMC has presented a proposal to KTMB board to privatise the cargo operation and estimates put the initial sum at RM2 billion.  The proposal was presented to KTMB president Datuk Elias Kadir around two weeks ago and he is in favour of it. MMC has also received an approval letter to do a due diligence on the privatisation effective yesterday.

If found both viable and profitable, a joint-venture company would be set up with KTMB to privatise the cargo business, with MMC holding the majority share.

“The privatisation of the cargo business is not a rescue plan as it will only benefit MMC, which is to complement its port operation,” Abdul Razak said. 

He said previous attempts to privatise KTMB, resulted in failure.

  Abdul Razak said MMC’s takeover would only dampen the company’s potential growth.

By Sharen Kaur
sharen@mediaprima.com.my
Published in NST on August 22, 2014

RISING COST: Property developers want govt to soften impact of new tax on industry
EVEN as property developers struggle to regain traction and cope with the rising cost of construction, they now have to deal with the six per cent Goods and Services Tax (GST).
GST, a multi-stage consumption tax that will come into effect on April 1 next year, will replace the government sales and service taxes (SST) of 10 and six per cent, respectively.
There are 950 items that will be taxed under the GST and more details on this will be realised at the forth-coming 2015 Budget.
The impact on prices is expected to vary, where some items will be cheaper, some goods will maintain their prices, while others will become more expensive.
Among the key challenges that the property market is facing are high land cost, which includes conversion, development charges, premium cost, quit rent and stamp duty, and scarcity of land, especially in urban areas such as Klang Valley and Penang.
Real Estate and Housing Developers’ Association (Rehda) patron Datuk Ng Seing Liong told Property Times that there is an increased cost of doing business due to the high capital contributions and compliance cost that developers can't run away from.
Other key challenges include highly regulated policies, laws and regulations, he said at Rehda’s GST roundtable discussion entitled “Impact of GST on Property Industry”, here, recently.
Also present were the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) chairman of construction, property and infrastructure committee and deputy secretary-general Tan Sri Teo Chiang Kok, Building Materials Distributors Association of Malaysia president Yang Kian Lock, and Master Builders Association Malaysia treasurer-general (MBAM) Eric Lai Wee Meng.
Ng said Rehda and 13 other associations that are directly and indirectly involved in property development and construction have submitted a memorandum to the Ministry of Finance Inc to highlight the impact of GST on the industry.
From April 1 next year, purchasers of commercial properties will have to pay the six per cent GST, while buyers of residential properties are exempted.
Ng said the GST, in its current form, will cause financial hardship by adding to the cost of development and resulting in higher property prices, which will eventually be passed on to house buyers.
He said residential properties are tax-exempted instead of being zero-rated, leaving developers unable to claim back the six per cent as part of input tax contributed to the GST.
“We cannot claim back input tax. A developer has to add the tax to the cost of construction and that will increase the selling price. We have sent signals to the government and they are not responding fast enough. There are only a few months left before the GST is implemented," Ng said.
Rehda is proposing that residential properties, including affordable houses, be zero-rated and commercial and industrial units to be standard-rated.
Zero-rated means builders can claim back the input tax; hence, they don’t have to pass on the increase to house buyers, while for standard-rated, GST is collected by the businesses and paid to the government. If their input tax is bigger than their output tax, they can recover the difference.
"The reality is that tax-exempt goods are only exempted from GST at the point of sale, that is when houses are sold by the developers. The goods and services that are used by the developers in the making of these tax-exempt goods are not exempted from GST.
“For example, building materials such as cement, steel bars, sand, bricks, wood, ceramic and roofing tiles are not tax-exempt and developers will either have to absorb the cost or raise house prices. The government is also proposing that land owners should start charging developers the GST as construction cost service.
“All these will add to our current construction cost, which is around 55 per cent. With the GST, our margins will be tighter and house prices will continue to rise. We can expect a more than three per cent increase in house prices next year.”
Ng said, with the rise in land prices and higher cost of construction, it would be quite difficult to get affordable homes below RM400,000, especially in prime areas in the Klang Valley, Penang and Johor.
Meanwhile, according to Yang, the impact of GST on cash flow for building material suppliers will be more severe.
“In our business, we provide credit facilities ranging from 30 to 90 days. But under the GST, we have to pay the tax under 21 days, even though we have not collected the money from our buyers. If we don't pay within 21 days, there will be a penalty of RM50,000, among others. The government has to be realistic and not impose such a ruling,” Yang said.
Lai of MBAM said contractors have estimated a four per cent rise in cost.
“The four per cent increase in construction cost coupled with the six per cent GST on other goods and services would eventually lead to higher overall cost of doing business,” he said.

 

Ng says cost of houses will rise due to, among others, high compliance cost that developers can’t run away from. Looking on is the roundtable moderator and Business Times Assistant News Editor Sharen Kaur

Residential properties are tax-exempted instead of being zero-rated under the GST, leaving developers unable to claim back the six per cent as part of the input tax.

Brahim’s willing to sell BAC stake

By Sharen Kaur
sharen@mediaprima.com.my
Published in NST on August 21, 2014

THE major shareholder of Brahim’s Holdings Bhd said he may consider selling the company’s stake in in-flight caterer Brahim’s Airline Catering (BAC) Sdn Bhd should there be a request from Malaysia Airlines (MAS).

Brahim’s owns 70 per cent of BAC, which has a 25-year contract (2003-2028) valued at RM6.25 billion to provide catering and related services at Kuala Lumpur International Airport (KLIA) and Penang International Airport.

MAS holds the rest of the stake in BAC.

“If MAS wants to buy our 70 per cent stake, we can let go. So far, there is no proposal. In fact, we have continuous engagements with MAS on how to reduce cost,” Brahim’s Holdings executive chairman Datuk Ibrahim Ahmad Badawi told Business Times.

BAC is formerly known as MAS Catering. In 2002, MAS was looking to sell the company as it had accumulated losses of RM240 million.

MAS Catering also had negative shareholders’ funds and was bleeding RM40 million to RM50 million a year.

In 2003, Brahim’s, the only Malaysian company providing industrial catering at that time, came in and acquired 70 per cent of MAS Catering.

It paid RM170 million upfront and took over the accumulated losses in return for a 25-year concession.

Analysts valued MAS Catering at no more than RM50 million at the time.

“MAS wanted to maximise the sale. Who would pay so much upfront to take over a lossmaking company? That’s why in return, MAS gave us a 25-year contract so that we could recover the investment.

“We spent an additional RM58 million on MAS Catering for machinery, equipment and control systems at KLIA to operate more efficiently,” said Ibrahim.

Brahim’s, which operates the world’s biggest halal flight kitchen, was in the limelight for getting the 25-year catering contract and many said the deal was lopsided.

“If you study it, this was a bailout for MAS.

That was what we did for the national carrier.

We worked hard for 10 years and turned the company around. Since we took over, we have paid out more than RM120 million in dividend and rebate to shareholders.”

On how much BAC is worth now, Ibrahim said it is difficult to gauge the actual value of the company.

“When we took over MAS Catering, it was serving 28,000 meals a day.Today, it can serve up to a record 62,000 meals a day. On average, we serve 55,000 meals a day,” he added.

“We worked hard for 10 years and turned the company around.” Datuk Ibrahim Ahmad Badawi Brahim‘s Holdings executive chairman

MMC plan said to get KTMB backing

By Sharen Kaur
Published in NST on August 18, 2014

KUALA LUMPUR: MMC Corp Bhd, which aims to control Keretapi Tanah Melayu Bhd (KTMB), has presented a proposal to privatise the cargo operations, and initial estimates put the sum at RM2 billion.
People with knowledge of the matter said the proposal was presented to KTMB president Datuk Elias Kadir two weeks ago and he was in favour of it.
They said MMC had received approval to conduct a due diligence, beginning today, on the privatisation.
“MMC has been given two months for the due diligence. If it is viable, a joint venture will be set up with KTMB to privatise the cargo business, with MMC holding the majority share,” said a source.
According to the source, MMC did not indicate how much it would invest in the privatisation exercise.
“MMC would require an initial sum of RM2 billion. It would need to buy up to 20 locomotives for about RM300 million and about 800 wagons worth RM900 million. It would also need to invest in infrastructure and build a yard,” the source said.
“MMC is looking at growing its port operations in Johor. But KTMB has only 60 locomotives, which are not sufficient to support the business. We believe MMC may request for ‘sweeteners’ from the government, which include financial backing, to privatise the cargo operations.”
MMC owns 70 per cent of Port of Tanjung Pelepas (PTP) and wholly-owns Johor Port in Johor.
PTP handles around 7.7 million twenty-foot equivalent units (TEUs) a year, while Johor Port can handle up to 35 million freight weight tonnes (FWTs) a year. Both ports hold a combined 42 per cent share of the port business in Malaysia.
MMC is spending RM1.6 billion to increase the handling capacity at PTP to 10.5 million TEUs a year, starting this year.
It has also allocated RM421 million to increase capacity at Johor Port to 45 million FWTs next year, targeting the oil and gas business.
The loss-making KTMB has been the target of several companies keen to take it private, including MMC and Gamuda Bhd.
Early this year, MMC had been keen to form a joint venture with Gamuda to take over KTMB in a deal worth more than RM5 billion but the plan did not materialise.

‘GST will impact local construction industry’

Published in NST on August 15, 2014

THE Real Estate and Housing Developers Association (Rehda) said the impending Goods and Service Tax (GST) will impact the local construction industry, especially on the joint venture (JV) developments between landowners and developers.
Datuk Ng Seing Liong, Rehda’s immediate past president and chairman of Rehda’s task force
on accounting and taxation, said once the GST is implemented, the land owners are expected to start charging six per cent to the developers.
“This six per cent is for construction cost service and landowner is not supposed to be involved in development.
“Now the government wants landowners to charge developers six per cent GST because they claim developers are providing construction service,” he said.
“Developers now pay high land cost to build houses. With the GST, they have to pay additional six per cent to the landowner as they own the land,” Ng said.
Under the current situation, developers will allocate certain units to land owners as part of the venture.
Ng was the speaker for Rehda’s GST roundtable discussion entitled “Impact of GST on Property Industry”. The session was mode-rated by Business Times assistant news editor Sharen Kaur.
Also present were The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) chairman of construction, property and infrastructure committee and deputy secretary-general Tan Sri Teo Chiang Kok and Building Materials Distributors Association of Malaysia (BMDAM) president Yang Kian Lock.
The government will implement GST with a six per cent rate to replace the current sales and services tax, from April 1 next year.
The GST registration turnover threshold will be RM500,000.
In general, the supply of goods and services as well as the importation of goods made within or between designated areas will not be subject to GST.
Ng said, currently, the GST does not consider JV between landowner and property developer to be a JV for GST purposes.
“The JV between landowner and property developer should also be considered as a JV for GST purposes and should be extended to cover joint-venture arrangements involved in real property transactions,” he said.

(From left) BMDAM president Yang Kian Lock, PKMM president Datuk Mokhtar Samad, Rehda taxation and accounting commitee chairman Datuk Ng Seing Liong, NST Business Times assistant news editor Sharen Kaur and ACCCIM chairman of construction, property and infrastructure committee and deputy secretary-general Tan Sri Teo Chiang Kok at the Rehda GST roundtable discussion in Wisma Rehda, Kuala Lumpur, yesterday. Pic by Mohamad Shahril Badri Saali

Naza TTDI — A brand to call home

By Sharen Kaur
Published in NST on August 15, 2014

INCORPORATED in 1973, Naza TTDI Sdn Bhd (formerly TTDI Development Sdn Bhd) is the primary property arm of the diversified Naza group.
From a developer that developed the acclaimed 286ha award-winning Taman Tun Dr Ismail township in Kuala Lumpur, Naza TTDI has now completed more than 15,000 residential and commercial units in the Klang Valley, building a sound fun damental and sterling track record.
The Naza group, meanwhile, was established by the late Tan Sri SM Nasimuddin SM Amin in 1975. It is currently Malaysia’s largest privatelyowned conglomerate with businesses that include automotive, food and beverage and hotel management.
Apart from these businesses, the group is also involved in limousine services (Prestige Limo), transportation (Naza transport), taxi services (Zalnas Limousine and Naza Citycab), aftermarket accessories (NZ Galaxy), financing (Naza Credit and Leasing), auto insurance (Naza Coverage and Eight Valuation) and plantations (Wood Vision).
Other townships that are currently being developed by Naza TTDI is the 84ha TTDI Alam Impian in Shah Alam and the 45.7ha TTDI Grove in Kajang. Both are mixed residential and commercial developments.
Naza TTDI is also undertaking several high impact developments, notably the RM4 billion Platinum Park and the RM21 billion 30.5ha KL Metropolis.
Platinum Park is an integrated mixed commercial and residential development within the Kuala Lumpur City Centre (KLCC) that will cater to three Grade A office towers, three residential serviced apartments and a hotel tower.
KL Metropolis, meanwhile, will be Kuala Lumpur’s international trade and exhibition district with the goal of positioning the country as a preferred MICE destination in the region.
The country’s largest exhibition space, the MATRADE Exhibition Centre, is currently under construction and due for completion in 2016.
“As testimony to the confidence in our brand, a substantial number of purchasers are repeat buyers. This underscores their faith in what we offer: excellent quality, delivery on schedule and the substantial capital appreciation of Naza’s TTDI products,” said Naza TTDI deputy executive chairman and group managing director SM Faliq SM Nasimuddin.
He said the company’s commitment to deliver quality lifestyle concepts and products centres on continuous pursuit of innovative designs and generous landscaping.
“We are all about creating a community that offers our customers a living environment which promotes neighbourliness, security and true peace of mind. Having achieved the MS ISO 9001:2000 Certification in 2004, we will continue to provide quality finishes to our end-products and pride ourselves on project completion ahead of schedule.
“We also assure our shareholders of optimum returns on their investments and belief in corporate social responsibility; fulfilling our duty as a responsible corporate citizen by giving back to the community.”

Creating value, exceeding expectations

By Sharen Kaur
Published in NST on August 15, 2014

BUILDING rapport is one of the most fundamental sales techniques. For developers, the key is to create interest in the life and activities of buyers by building a product that matches their needs.
Another aspect of building a strong connection is by being sincere, as well as showing empathy and reaching out to the buyers. This creates a bond that enables buyers to feel that they are
important, and that they can actually count on the developer.
Last but not least is to display a depth of character in the product.
Attractiveness will increase the chances of striking a rapport with the people againing repeat buyers.
Naza TTDI Sdn Bhd, the property development arm of the Naza group of companies, has come a long way since its first established township - Taman Tun Dr Ismail in Kuala Lumpur.
Taman Tun Dr Ismail, or commonly known as “Taman Tun” or “TTDI”, was named after the country’s second deputy prime minister and originally a 286ha rubber plantation.
This self-contained township with freehold tenure was conceived not just as a housing scheme but to bring Malaysians of various races together in harmony.
Development plans started in 1973 by UDA-Seapark Sdn Bhd, a joint venture between the Urban Development Authority (UDA), which is the government arm for urban planning and redevelopment, and SEA Housing Corp Sdn Bhd, a private developer headed by well-known philanthropist, the late Tan Sri Lee Yan Lian.
Construction commenced in 1974 after Kuala Lumpur was created as a Federal Territory.
The master plan of the township went through four major improvements to cater to the changing needs of the residents.
There was also a change to the own ership with TTDI Development Sdn Bhd taking over the development in the 1980s. Naza TTDI bought over TTDI Development in 2004 and changed its name to Naza TTDI in March 2008 to reflect its association with the Naza group.
Today, TTDI consists of landed properties, townhouses, condominiums and commercial units with its own landscaped park. More than 6,500 housing units worth RM1.35 billion have been sold and completed, occupying 54 per cent of the land area.
The balance area was designated for public amenities that included schools, colleges, banks, mosque, dry market and an office complex called VADS Plaza (formerly the IBM), which, until today, is still a landmark for TTDI.
In 1994, TTDI was awarded with the FIABCI Award of Distinction for Residential Property, making it one of the most prestigious townships not only in Malaysia, but also in the world.
Following the success of the Taman Tun township, Naza TTDI collaborated with the government to spearhead the squatter resettlement and re-housing in Desa Pandan, Kuala Lumpur, and Desa Bakti, Selayang, covering a total of 66ha.
The mixed-development projects comprising more than 4,000 residential and commercial units had created proper planned townships with a better quality of life for the former squatters.
Naza TTDI was also involved in the development of more than 200ha at TTDI Jaya and Section 13 in Shah Alam, Selangor, where the Tadisma Business Park is located.
“We successfully completion the Giant hypermarket in Section 13, Shah Alam, within a record six months.
We also constructed the Shah Alam Malawati Indoor Stadium in 1998 in time for the Commonwealth Games boxing event.
“The lifestyle concepts that have been incorporated into the development of Tadisma Business Park have changed to the environment and ambience of the area to that of a lifestyle commercial and residential area,” Naza TTDI deputy executive chairman and group managing director, SM Faliq SM Nasimuddin told Property Times.
He said Naza TTDI will continue to spearhead positive changes in the industry, challenging the businesses, consumers and public perception of property players.
“We recognise both the business ethos and the moral obligation to carry out our activities in a socially responsible
manner. Building on our philosophy of good practice, Naza TTDI consistently contributes to a healthier and caring society. We are committed to create value and care for our people, stakeholders, customers and the environment.
We are committed to quality; always meeting clients’ requirements in every aspect of our products and services.”
Faliq said Naza TTDI will always remain true to its core values of value, innovation and quality.

An artist’s impression of Alam Impian

Naza TTDI deputy executive chairman and group managing director SM Faliq SM Nasimuddin (left), says the company has the moral obligation to carry out its activities in a socially responsible manner. With him is Naza Group joint executive chairman SM Nasarudin SM Nasimuddin.

Putrajaya Perdana - Building a good life

By Sharen Kaur
Published in NST on August 14, 2014

PUTRAJAYA is the world’s first “Intelligent Garden City”.

It has an infrastructure of sophisticated information networks based on multimedia technologies which made history in Malaysia’s modern city planning.

Putrajaya, which covers 4,931ha, was conceived in 1993 as the administrative centre for Malaysia.

Previously, palm oil plantations dotted the area. Today, it is a spectacular city and home to various ministries, government departments and agencies, hotels, small and medium enterprises, and more than 70,000 households.

The master plan is designed along an axial tangent which runs from the northeast to the southeast on gently undulating terrain.

About 40 per cent of Putrajaya is natural. Lush greenery, botanical gardens and parks are spread across landscapes enhanced by large bodies of water and wetlands.

Another impressive feature is the uniquely designed bridges that span the various points of the sprawling Putrajaya Lake.

Although the federal administrative capital officially moved here in 1999, Putrajaya is still far from complete.

There are a few property developers with ongoing projects here and that includes Putra Perdana Develop ment Sdn Bhd (PPD), the property development arm of Putrajaya Perdana Bhd.

Green developer

PPD is one of the foremost green property developers that built D’Heron at The Lake, which is the first “energy efficient-BIPV residences” in Malaysia.

The company has proven itself in meeting clients’ expectations for high-quality end-to-end construction and development solutions since its inception in 1998.

PPD’s current project is Danau Mutiara, comprising bungalows, semi-detached (semi-D) units and zero-lot bungalows.

The project has a gross development value (GDV) of RM200 million.

PPD chief executive officer Ahmad Ridzal Ahmad said the company has several projects in the pipeline which will enhance the value of existing developments.

He said future developments at Precinct 16 will be launched soon.

These include Parcel 6, comprising bungalows, and Parcel 25, featuring semi-Ds, bungalows and hillside condominiums.

Ahmad Ridzal said these developments will have an estimated GDV of RM500 million.

He said the hillside condominiums will be a green building index (GBI) development and will incorporate a wellness centre.

On the key selling points for each project, Ahmad Ridzal said the projects will be GBI-rated and have good accessibility via various highways, including Maju Expressway.

He said they will also have quality finishing with construction quality assessment system rating, and established neighbourhood facilities, such as a fully-equipped community centre, mosque and schools.

“We will offer contemporary and high-end two-and-a-half-storey bungalows and zero-lot bungalows as well as semi-Ds. We expect many to grab our product offerings.

“We are offering a serene locality, peaceful community and lush landscaping. The houses are within walking distance to Putrajaya Lake,” he told Property Times.

Ahmad Ridzal said the projects are also within minutes by car from Alamanda shopping complex.

PPD is targeting to achieve a revenue of RM118 million this year from the sale of current projects and new launches.

For Danau Mutiara, the company has achieved 70 per cent of its GDV since its launch in May.

“Sales so far have been very encouraging. We expect to recognise a certain amount of revenue from Danau Mutiara this year.”

Ahmad Ridzal said sales were driven by the company’s participation in property expos and related events, targeted marketing and direct approach with prospective buyers.

PPD also offered incentives, such as bearing the legal fees and giving rebates of up to RM10,000.

“Cooling measures have impacted properties in the price range of RM1 million, mainly high-rise developments.

Landed properties are still sought after and this is where we have the advantage.

“On the Goods and Services Tax (GST), we expect there will be an increase in sales a few months before the implementation. After the implementation, we will probably see a slowdown before sales pick up again, as seen in countries which implemented GST,” said Ahmad Ridzal.

Expectations for 2015 Budget

Ahmad Ridzal is expecting more incentives for developers and house buyers in the 2015 Budget.

He hopes there will be no further dampening effects on developers and buyers as everyone has to deal with GST and the rise in real property gains tax announced in the 2014 Budget.

Ahmad Ridzal said rising cost of living and doing business, subsidy rationalisation and GST are among the factors that should be taken into consideration when formulating the 2015 Budget.

“We hope the government will develop more affordable houses in the Klang Valley and provide incentives for property developers to undertake these projects, such as easier end-financing schemes.

“We also hope the government will allow first-time buyers to enjoy the Developers Interest Bearing Scheme.”

Ahmad Ridzal said the 2015 Budget should also encourage banks to ease lending to house buyers, especially first-timers, as people are facing difficulty in obtaining loans

An artist’s impression of the zero-lot bungalows in Danau Mutiara.

“Landed properties are still sought after and this is where we have the advantage.„ Ahmad Ridzal Ahmad PPD chief executive officer

‘Khazanah able to rescue MAS’

By Sharen Kaur
Published in NST on August 14, 2014

KHAZANAH Nasional Bhd should be given the benefit of engineering the rescue of Malaysia Airlines (MAS), says MIDF Research head Zulkifli Hamzah.

He said the delisting of MAS will accord Khazanah greater manoeuvrability to restructure the company and ensure its long-term viability.

Zulkifli also does not expect MAS to be declared bankrupt because of Khazanah’s strong backing.

“This has not been attempted before. Thus, the government should be given the benefit of engineering the rescue of MAS, away from the prying eyes of the public, which can be distracting at times.

“MAS has enough cash to last it well into 2015. Therefore, ceasing its operations with a view of starting afresh is not exactly a pressing option,” he told Business Times via email.

MAS started a massive restructuring plan at the end of 2011 to reduce cost and return to profit.

However, despite several “rescue plans”, “restructuring plans”, and “new business plan”, MAS lost RM4 billion in three years.

Khazanah, which owns 69.37 per cent of MAS, has proposed to take the Main Market-listed national carrier private with an offer of 27 sen per share to minority shareholders.

Upon completion of the RM1.4 billion exercise, Khazanah will become MAS’ sole shareholder, which would lead to a delisting by the end of this year.

Some analysts opined that the Khazanah announcement is a pre-emptive move to contain negative sentiment on MAS’ stock ahead of its second-quarter results to be released on August 22.

MAS is expected to report heavier losses for the quarter ending June 30, due to knee-jerk reactions on its bookings after Flight MH370 disappeared on March 8.

The results will not include the impact of Flight MH17, which was shot down in  Ukraine on July 17.

MAS, however, may give an indication of how the second tragedy will impact its earnings during the announcement of the results.

On Brahim’s Holdings Bhd, Zulkifli said the company still maintains a 25-year concession agreement with MAS to supply the latter’s inflight meals.

He sees two possible scenarios subsequent to the delisting exercise. These include MAS cutting down its capacity by 10 to 15 per cent, which will reduce the demand for Brahim’s inflight meals, or the national carrier re-negotiating the terms of the concession agreement with the company.

“If MAS was to cease operation, the government will have to compensate Brahim’s at a fair value plus 20 per cent premium based on the concession agreement,” Zulkifli added.

MIDF Research head Zulkifli Hamzah does not expect MAS to be declared bankrupt because of Khazanah’s strong backing

Upon completion of the RM1.4 billion exercise, Khazanah will become MAS’ sole shareholder, which would lead to a delisting by the end of this year. Bloomberg pic

Cutting costs

By Sharen Kaur
Published in NST on August 13, 2014

HIGH HOPES: Airline can save RM300m a year by ending contracts with suppliers, including Brahim’s
MALAYSIA Airlines (MAS) could save more than RM300 million a year should it terminate contracts with some of its suppliers, including inflight caterer Brahim’s Holdings Bhd.
According to company officials, the suppliers will be compensated based on their respective agreements with MAS, and that could work out to more than RM400 million in total.
 However, the actual amount would depend on the compensation clause, if any, in the respective agreements, the officials said.
  “If Brahim’s is causing MAS to bleed, then the contract should be cancelled. But food isn’t the only issue for MAS as it has to look at non-profitable routes. If MAS’ top management really wants to turn it around, this should be one of the issues it has to tackle. Otherwise,  it will be an uphill task,” said an official.
 MAS started a massive restructuring plan at the end of 2011 to reduce cost and return to profitability. But despite it, MAS lost RM4 billion in three years.
On average, food and beverage expenses made up between 1.5 and 1.8 per cent of MAS’ total operating costs, which amounted to RM14.2 billion for the year ended December 31 2012.
 Khazanah Nasional Bhd, which owns 69.37 per cent of MAS, recently proposed to take the national carrier private with an offer of 27 sen per share to minority shareholders.
Upon completion of the RM1.4 billion exercise, Khazanah will become MAS’ sole shareholder, which would lead to a delisting by the end of this year.
 MAS’ most expensive contract currently is with Brahim’s Airline Catering (BAC) Sdn Bhd to provide catering and related services at Kuala Lumpur International Airport and Penang International Airport.
 BAC is 70 per cent-owned by Brahim’s via Brahim’s Sdn Bhd (BSB), previously known as Brahim’s-LSG Sky Chefs Holdings Sdn Bhd, and 30 per cent by MAS. It has a 25-year (2003-2028) catering contract valued at RM6.25 billion, or RM250 million a year.
Brahim’s has said that should the contract be terminated, it would seek compensation from MAS as mentioned in their agreement, which includes a fair value of 20 per cent premium.
The concession is worth about RM400 million. Based on the number of years left, coupled with the RM130 million that Brahim’s paid LSG Asia GmbH last year for its 49 per cent stake in BSB, the company would receive about RM320 million.
Mercury Securities head of research Edmund Tham thinks that the catering contract will continue as long as MAS is still in business.
 “If MAS is declared bankrupt or bought by private companies, then I am not sure if the contract will stay,” he said.
 In February, Wee Choo Keong, former member of parliament for Wangsa Maju, told Business Times that MAS should terminate the contract with Brahim’s to narrow its losses.
  “The contract is just overpriced and squeezing MAS’ profit margin. Brahim’s would have to be compensated, but it would still be cheaper for MAS than to continue with the contract,” he said.

Tropicana Metropark a ‘resort gateway’

By Sharen Kaur
Published in NST on August 8, 2014

INVENTIVE, INNOVATIVE DEVELOPER: RM7.2b project a cradle for dwelling, a centrestage for business and sanctuary for relaxation

DEVELOPERS are offering more and more amenities, including lush landscape and rooftop pools or lounges, to attract young urban professionals and home upgraders and it is all driven by competition. They are offering more than a real estate, and such goodies are part of a developer’s aim to make their new projects stand out in a crowded marketplace.

An interesting development is Tropicana Metropark, a RM7.2 billion project by Tropicana Corp Bhd (TCB), which will have perks like a 3.7ha central park and a new flyover linking it directly to the Federal Highway.

The 35.4ha integrated development sits on prime freehold land in Subang Hi-Tech Industrial Park, Selangor.
TCB, which is best known for its Tropicana Golf and Country Resort development in Petaling Jaya, Selangor, acquired the land in 2011 for RM385.5 million.

While the land is located in an area much sought-after for its established neighbourhood, ready amenities and facilities, TCB knows that in order to sell, it must continue to invent and be innovative to create a difference over other developments within the vicinity.

Known for offering green open park spaces, multi-tiered security, easy accessibility to amenities and transportation, TCB is building Tropicana Metropark to leverage on the change in mindsets among new home owners and create a “resort gateway”.

Unveiling a fresher design concept in residences, business spaces, retail spots and recreational area, Tropicana Metropark is a cradle for dwelling, a centrestage for business and a sanctuary for relaxation.
The design concepts were inspired by the development plan of Melbourne’s Yarra River, London’s Oxford Street and the streets of Tokyo.

The project offers varied components comprising serviced residences, retail units, business suites, SOHOs (single office home offices), office towers and a mall.

The heart of this project is the central park — a large green oasis featuring a man-made lake, pedestrian promenade and a food and beverage strip for alfresco indulgence.

Dedicated for leisure and recreation, the park is accessible from all components of the project. The pathways that weave through it are ideal for leisurely walk or jogging, and there is also a bicycle track.

“The stunning landscape and numerous water features will soothe the senses and rejuvenate body, mind and soul. Tropicana Metropark is an ideal place to call home for those unwilling to compromise on open spaces and greenery, location or distinctiveness,” said TCB group chief executive officer Datuk Yau Kok Seng.
Tropicana Metropark will be served by a network of highways, including a new RM106 million flyower under construction that will link the project to the Federal Highway.

“Accessibility and connectivity are part of our group’s development DNA. Once the construction is completed, the flyover will not only benefit the residents of Tropicana Metropark, but also the areas of USJ and Subang Jaya as well. It will provide even greater connectivity and ease for both Tropicana Metropark and its neighbouring areas,” Yau told Property Times.

Construction of the flyover started in the second quarter of this year and is expected to be completed in 2016.

Aside from that, Tropicana Metropark is closely located to the Batu Tiga and Subang Jaya Komuter stations with a distance of 0.08km and 3.2km, respectively, and the Kelana Jaya light rail transit station with a distance of 6.33km.

Residential elements

Tropicana Metropark will have five residential towers and the key features include sky gymnasium, sky lounge, bubble tub, sanctuary pool, jacuzzi, half-sunken basketball court, stone garden, children's playground, multipurpose hall and floating pavillion.

So far, two towers have been launched.

Pandora Serviced Residences, or Phase 1, was launched in June last year with a successful take-up rate of 90 per cent.

It has a gross development value (GDV) of RM365 million and comprises 627 units offering three design options in two 25-storey residential towers – studio, two and three-bedroom - with built-up areas ranging from 600 square feet (sq ft) to 1,200 sq ft.

The launch price was from RM650 per square ft (psf).

Its second phase, the 30-storey Paloma Services Residences has a GDV of RM465 million and comprises Block A and B, offering 587 units, including 16 courtyard villas.

Block B consists of 248 units and more than 90 per cent has been taken up, since its launch at the end of last year.

Recognising the increase in demand by discerning customers who enjoy the best of lush modern luxury, TCB opened block A in April, which offers 323 units and the villas. More than 50 per cent of the units have been sold.

The built-up area for the units at Block A and B range from 609 sq ft to 1,300 sq ft and they were sold at more than RM750 psf.

"All the units have been designed to meet the needs of the different market segments. The studios are suitable for single professionals, while the two-bedroom is ideal for young couples and three-bedrooms for small families. The villas boasts 2,400 sq ft to 2588 sq ft 4+1-bedroom units that are perfect for larger families," said Yau.

Targeted for completion within four years, Pandora and Paloma homes will each have a built-in kitchen cabinet, air-conditioner units, hob and hood. Owners of larger units will enjoy additional features such as shower screen, water heater and oven.

Obviously the biggest draw for owners is the immense green belt in the middle of the development, ideal for overall wellbeing and recreational pursuits.

In conjunction with the festive season, the Tropicana Metropark sales gallery in Subang will be hosting a Hari Raya cum Merdeka Open House on August 23 and 24.

For more information, visit www.tropicanametropark.com.my. Or alternatively, call 03 5636 6888 / 018-379 2088. The property gallery is open from 9.30 am to 6.30 pm daily (including Public Holidays).

Award-winning
Tropicana Metropark has won two prestigious awards, despite starting only in 2012.
The project won top honours at the recent Asia Pacific Property Awards 2014 in the landscape architecture category.

In 2013, Tropicana Metropark bagged the best mixed-use development category from Asia Pacific Property Awards.

“Tropicana Metropark essentially encapsulates Tropicana’s overall development DNA that is built on the cornerstones of accessibility, connectivity, innovative concept and design, generous open space, amenities, facilities, multi-tiered security and quality, as well as catering to the needs of discerning customers.
“Fuelled by these latest achievements, we will continue to strive to become one of the premier property developers in the country,” said Pam Loh, TCB’s executive director for marketing and sales.
                                                                     

Pam Loh, Tropicana Corp Bhd executive director for marketing and sales (this from left) holding an award for a project which won top honours at the recent Asia Pacific Property Awards 2014 in the landscape architecture category.

Pam Loh, Tropicana Corp Bhd executive director for mar                                                 

                                      

‘RM4b payout for MMC, Gamuda’

By Sharen Kaur
Published in NST on August 1, 2014

SG BULOH-KAJANG MRT LINE: JV may receive RM1.38b fee, reimbursed RM2.85b for work done

MMC Corp Bhd and Gamuda Bhd will collect more than RM4 billion for playing the role of project manager for the Klang Valley MRT (KVMRT) Sungai Buloh-Kajang line.

  The amount will be paid to MMC Gamuda KVMRT (PDP) Sdn Bhd, a 50:50 joint-venture formed in December 2010.

  MMC Gamuda KVMRT was appointed as the project delivery partner (PDP) for the Sungai Buloh-Kajang line in February 2012.

Its primary function is to deliver the 51km line within the agreed key performance index of target cost and completion date. The target cost would include the total work package  contract value and reimbursables, which are capped at RM2.8 billion.

  Mass Rapid Transit Corp (MRT Corp) chief executive officer Datuk Wira Azhar Abdul Hamid said at a recent media briefing the Sungai Buloh-Kajang line’s total cost will be RM30 billion.

  He said RM23 billion is for systems and construction, while RM7 billion includes consultant fees and reimbursables to the PDP.

 The line is scheduled for completion by July 2017, he added.

  If the Sungai Buloh-Kajang line is delivered within the agreed target cost, the PDP will be paid a fee equivalent to six per cent of the total work contract.

  Based on the systems and construction cost of RM23 billion, the PDP will receive RM1.38 billion. However, it will also be reimbursed for overheads, engineering consultancy, quantity surveying, system integration work and site investigation and topographical survey costs totalling RM2.85 billion.

  “Adding the reimbursables to the six per cent fees, the PDP will collect RM3.93 billion for playing the project manager role,” said an analyst.

  The analyst also expects MMC and Gamuda’s construction divisions to record higher pre-tax profit this year due to swifter Sungai Buloh-Kajang line work progress.

  The line is 47.63 per cent completed. As at June 30, the PDP has received fees and reimbursables amounting to RM1.03 billion from MRT Corp.

  The MMC-Gamuda joint-venture will also gain from a RM8.2 billion contract to design and build a 9.5km underground tunnel with seven stations for the Sungai Buloh-Kajang line.




MMC Gamuda KVMRT was appointed as the project delivery partner  for the Sungai Buloh-Kajang MRT line in February 2012.

Keep DIBS for first-time buyers

By Sharen Kaur
Published in NST on August 1, 2014

REAL Estate and Housing Developers Association (Rehda) president Datuk Seri FD Iskandar Mansor (DSIM) speaks with Sharen Kaur on the local property market.

Q: What is your view on the various measures announced by the government to curb speculation, such as a rise in the real property gains tax (RPGT), the removal of the developers interest bearing scheme (DIBS) and foreign ownership threshold?

On RPGT increase

DSIM: The increase may help curb speculation to some extent, but not in all locations, especially prime areas. We do see an impact in the primary and secondary markets following the RPGT increase, particularly genuine buyers who may want to upgrade or relocate within the first five years of acquisition.

You can see a downward trend now. I have no problems if the government wants to penalise speculators, but don’t do it at the expense of genuine buyers. Don’t penalise first-time house buyers or real home purchasers and also investors. I would like Bank Negara Malaysia and the government to re-look the RPGT on a case-by-case basis. It is in our culture to own a few houses to pass down to our children and as an investment for their education.

On DIBS removal

DSIM: The real reason for the DIBS home financing package by some developers was to facilitate home buyers in their acquisition cost during the initial stage of a purchase.

We believe that removing DIBS will hurt genuine buyers, especially first-time home buyers. I believe it is unfair to remove the DIBS. It is difficult for first-time home buyers to come up with a 10 to 20 per cent downpayment.

I hope the government will allow DIBS to be continued, at least for first-time house buyers and not limit it to properties worth RM400,000 and below.

On the higher foreign ownership threshold

DSIM: I don’t think there will be a major impact on the property market as houses currently are already worth that much, especially in prime locations in the Klang Valley, Johor and Penang, as well as Perak and Sabah. These are areas where foreigners buy properties. Nevertheless, the imposition will certainly reduce sentiments from foreign buyers and affect foreign property investment in the country and there may be foreign exchange losses.

Q: What is your take on the implementation of Goods and Services Tax (GST) next year?

DSIM: Rehda has submitted a memorandum of understanding to the Finance Ministry on the impact of the GST on the public at large.

In its current form, we feel it will impose further hardship to consumers and there will be an increase in house prices. At present, land and property transactions are subject to a stamp duty averaging 2.75 per cent. The GST will result in double taxation and inevitably lead to higher cost of property transactions.

With the implementation of GST, stamp duty on transfer of properties should be abolished or lowered to reduce the burden on property buyers. We have proposed a GST model for the housing market. For properties priced between RM100,000 and RM400,000, we have proposed for it to be zero rated.

Q: What is your outlook for 2015?

DSIM: It is not possible to lower house prices because of an increase in the cost of doing business. As it is, house prices in selected locations have gone up by between five and 15 per cent. In locations such as Mont Kiara and Bangsar, house prices have increased by more than 15 per cent. More than 99 per cent of the time, when you buy a house, the price will increase. As we speak now, house prices are increasing, so it is always a good time to buy.

To stabilise house prices, we need to increase the supply. Since October last year, a few measures unfolded with the reinstatement of RPGT, removal of DIBS, affordable housing initiatives by the government and higher price threshold for foreign buyers. Since then, launches and take-up rate have gone down. With the cooling measures announced, we anticipate some impact on the property market.

Although the budget is tailored to promote a more stable and sustainable property market, all these measures will inevitably bring some major changes in both the demand and supply sides of the equation.

With the various measures put in place, I don’t think property transactions can pick up next year. We will see an increase in property transactions just before the GST is implemented as people would rush to buy.

Once the GST is implemented, there will be a slowdown again, at least for six to nine months.

The biggest market currently is for houses priced between RM150,000 and RM200,000, followed by properties worth between RM200,000 and RM400,000, and we believe that trend will continue next year.

Q: What is your view on affordable housing?

DSIM: It was announced in the 2014 Budget that RM1.9 billion has been allocated to build 123,000 affordable homes. In foreign countries, it is the government who takes on the role to build affordable houses. As a developer, we are not running away from building affordable house. We want to be there and help but because of scarcity of land and the high cost of construction, it is becoming difficult for us. The state governments have a lot of good land and perhaps, they should free up some parcels for us to develop. This could help to reduce the cost of constructing each home.

Affordable houses should also be near public transportation and amenities. They should be well-connected to the LRT, MRT and monorail, for example.

‘Property prices to keep rising’

By Sharen Kaur
Published in NST on August 1, 2014

REAL Estate and Housing Developers Association (Rehda) president Datuk Seri FD Iskandar Mansor says property prices will continue to rise because of the supply and demand factor and high land cost.

According to National Property Information Centre, the average annual housing completion was 100,000 units against the average annual household formation of 140,000.

Iskandar, who is Glomac Bhd managing director and chief executive officer, said the public still have the misconception that developers are to blame for escalating property prices.

He said it is not possible for developers to reduce or maintain the selling price for new launches because of land cost, coupled with high conversion premium which has risen by up to 300 per cent recently.

“Glomac bought 80ha in 2009 in Puchong and paid almost RM15 million premium for conversion. In 2011, we bought an additional 80ha to expand the development and paid almost RM49 million,” Iskandar told Property Times.

On the cost of doing business, Iskandar said it has been increasing every year and developers are not enjoying the 30 per cent profit margin like before.

According to him, developers make around 15 per cent profit margin now because of high compliance cost, development and infrastructure charges, quit rent and stamp duty.

“Some 20 years ago, when we develop a piece of land, water and electricity is supplied to the area. All we need to do is connect the supply to the development. Today, we have to get water and electricity from the main source and this is costing us more.”

He said for landed properties, utility cost in terms of gross development cost (GDC) has risen by five per cent to 19 per cent in the past two years.

For strata title properties, the cost has increased by six per cent, and or townships, between nine and 25 per cent.

“The public should not blame developers for the increase in house prices.

Utility companies are making money from both consumers and developers.”

Iskandar said Rehda has been engaging with the government and companies like Tenaga Nasional Bhd, Telekom Malaysia and Indah Water Konsortium Sdn Bhd, among others, to find ways to resolve the matter.

He also said land is also getting scarce and more expensive.

“In early 2007, when Glomac bought land nearby the Petronas Twin Towers, the seller asked for RM1,000 per square feet (psf) but we wanted to pay only RM600 psf. I knew what we wanted to build on it so we paid RM1,000 psf.

“A few research houses downgraded Glomac because of that. Now, that same piece of land is worth RM3,500 psf and the value of the building has risen. Land cost has tripled in the last seven years.”

Iskandar said there are many issues that need resolving soon in the local property market, which is one of the pillars of growth for Malaysia.

“We are in an industry which is highly regulated. We are governed by three different authorities, namely the state government, the Federal Government and the local authorities. If we don’t comply, we won’t be able to get development approvals.

“Rehda has around 1,200 members, who directly and indirectly employ close to one million people. Last year, total loans given to the real estate industry was 40 per cent. It was the highest on record.

“In terms of compliance cost, the contribution to the local authorities is between four per cent and 18 per cent for landed properties, around five per cent for strata title properties, and as much as 20 per cent for townships.

“If we keep having issues such as rising cost of doing business, delays in approvals and more cooling measures, the sector will become stagnant,” Iskandar added.