PETALING JAYA: The ending of the proposed merger between IJM Land Bhd and Malaysian Resources Corp Bhd (MRCB) has come as a disappointment for the former’s shareholders.

Investors had expected that a merged IJM Land-MRCB entity, which would have been the de facto property arm of the Employees Provident Fund (EPF), would play a major role in the major development planned for the 3,300 acres of Rubber Research Institute Malaysia (RRIM) land in Sungai Buloh, Selangor.

The expectation was driven by the fact that the EPF holds the mandate for the RRIM land and is a controlling shareholder of MRCB with a 41.63% stake, as well as a substantial shareholder of IJM Land’s parent IJM Corp Bhd, with a 16.3% stake. EPF also owns a 7.5% direct stake in IJM Land.

But with the merger called off, IJM Land’s investors have had their expectations curtailed.

It is still possible for IJM Land to revisit a merger with EPF-controlled MRCB, perhaps at a later stage, but until that happens, it will not be sitting still waiting for big projects to drop into its lap.

In fact, IJM Land’s prospects are looking as strong as ever as it kickstarts new development projects for this year and next. Meanwhile, it still has its crown jewel, the 2,000-acre Canal City township project in Kuala Langat, Selangor, which it co-owns equally with Kumpulan Europlus Bhd, an associate company of IJM Corp.

Canal City, which is adjacent to Kota Kemuning, has a total gross development value (GDV) of more than RM10 billion. It is IJM Land’s largest ever township project and one that is no less significant than the proposed development for RRIM’s land. Other than the vast size of the township, the low holding cost of the Canal City land, at RM5 per foot, means that the project could potentially be lucrative in terms of development margins.

Interestingly, the first phase of the Canal City will be pushed out to the market in 2012, earlier than the RRIM project, which is still believed to be on the drawing board.

In an interview with The Edge Financial Daily, Datuk Soam Heng Choon, IJM Land managing director, confirms that the Canal City project will be pushed to the market in 2012. He says the company is in the final leg of sorting out the development plans and getting the necessary approvals for the project.

“It will be our anchor project, along with The Light in Penang (with a GDV of RM4.9 billion),” says Soam, adding that the project will have a long development cycle of 10 to 15 years.

Canal City is expected to give IJM Land a strong boost from next year onwards. That aside, the company has also lined up property launches with a GDV of RM2 billion this year alone, which is its highest ever, Soam adds. The RM2 billion to be launched this year does not include the Canal City township project.

The value of launches planned by the company this year is significant compared with the RM1.4 billion in GDV launched last year. With its current unbilled sales at RM900 million, which is also a record, further major launches would create ever greater momentum for IJM Land in terms of revenue and earnings growth going forward.

“Property development is a cyclical sector. Now it is in a strong cycle and we are confident of launching more products into the market, or else we would not be doing our shareholders a favour,” says Soam.

While he reckons that the commercial property segment has turned soft, Soam says there is still huge potential in Malaysia’s housing market due to its young population, consumer confidence and low interest rate environment that is likely to continue this year.

While the loan-financing cap on the acquisition of third properties has resulted in purchases in certain segments slowing down, Soam says demand is still strong from those purchasing properties for their own occupation.

“With new households being formed at 200,000 a year, it is inevitable that these young families need homes, and this will continue to prop up demand for homes,” he says.

While he does not elaborate on the value of the maiden launch for Canal City next year, Soam says the company is looking at building landed terraced homes there for between RM400,000 and RM500,000 for a start. Soam says margins for the Canal City township could be lucrative, given the low land-holding costs on its book.

The IJM group and Kumpulan Europlus secured the land parcels in Canal City from the Selangor government as payment in kind for their involvement in the flood mitigation works and construction of the Shah Alam-Shah Alam 2 Expressway. The cost of the projects, undertaken by the IJM group and Kumpulan Europlus, translates into about RM5 psf for the 2,000 acres of land in Canal City, now jointly owned by both IJM Land and Kumpulan Europlus.

In east Malaysia, IJM Land also has a township project in Sandakan, Sabah, with properties selling for RM600 psf. In total, the company is looking at launching RM500 million worth of properties in Sandakan and Kota Kinabalu this year.

As for its development in The Light II, Penang, Soam says RM420 million worth of properties are expected to be launched this year, with selling prices of between RM600 and RM900 psf. In Sebana Cove, Johor, IJM Land has earmarked an enclave for the development of vacation or retirement homes.

Apart from the Canal City land and other parcels that have low holding costs, and where development could be stretched over many years to maximise value, Soam says the company prefers to adopt a fast-turnover development strategy for most of its landbank. The purpose of this is to recycle the company’s capital quickly enough to undertake new projects in order to sustain its high growth rate.

“At this stage, we are not keen on developing or expanding our portfolio of investment properties. Our strategy now is to develop and sell the properties we have built. Only after we have attained a critical mass for, say a township development, will we develop and keep a portfolio of investment properties for recurring income,” he says.

With the proposed merger with MRCB having been called off, IJM Land is “single” again, Soam quips.

“We are not ruling out the possibility of merger opportunities with other players, but it is not the case where we are going to call up every property player in town next, to see if they are interested in a marriage with us,” Soam adds.

He stresses that despite the IJM Land-MRCB deal having been called off for now, the relationship between the two property developers has not soured.

“Even though we may not form a company together, we are still open for joint ventures and partnerships with each other,” he says.

Investors continue to closely watch IJM Land to see if it might still be able to participate in the development of the RRIM land. But for now, this remains guesswork at best as the EPF has yet to officially indicate how it wants to carry out development of the land.

On what investors had expected before the deal was called off, Soam clarifies that the merger between IJM Land and MRCB was planned without factoring in the RRIM land development.

“For all intents and purposes, the merger was good for both companies, as it would have beefed up our balance sheets to take on bigger projects, especially those overseas such as in China, where land acquisition could easily cost billions of yuan,” Soam says.

That said, he adds that IJM Land is still interested in bidding for the projects on the RRIM land, as the developer has a proven track record and the balance sheet for the job.

IJM Land closed three sen higher last Friday at RM2.88. It is trading at 18.8 times estimated earnings for FY2011 ending Mar 31, and at 1.92 times book value, based on its net assets per share of RM1.50 as at Sept 30.

By The EDGE Malaysia

Guocoland (Malaysia) Bhd, the property arm of Hong Leong Group, will invest RM1.9 billion on a mixed development in Kuala Lumpur, Prime Minister Najib Razak said in a statement today.

The project will include offices, retail space, a hotel and apartments, Najib said.

By Bloomberg

KUCHING: Ibraco Bhd, which is expected to come out of the Practice Note 17 (PN17) status soon, has chalked up sales of RM140mil for its newly-launched commercial, industrial and residential project called Tabuan Tranquility.

Located along the Kuching-Kota Samarahan Expressway, it is Ibraco's biggest mixed development project on 66ha which comprises 640 double-storey terraced houses,108 semi-detached houses, 60 three-storey townhouses, 76 units of four-storey shophouses, 72 semi-detached industrial buildings, an office block and a petrol station.

Also on sale are 24 residential detached lots.


Chiew Chiaw Han says Ibraco is on the lookout to increase its landbank.

Ibraco chief executive officer Chew Chiaw Han said the project, which formed part of the company's regularisation scheme, had a gross development value (GDV) of RM517mil.

“The project has a five-phase development up to 2015. Two of the phases have been launched,” he told StarBiz yesterday. The project is expected to generate a gross profit of RM83.5mil.

He said 70 units of the shophouses priced between RM1mil and RM1.79mil had been sold for RM73mil. The mall will be completed in July.

Sales of RM67mil were generated from 160 houses under phase five launched more than a month ago. This phase comprises 204 terraced houses and 38 semi-detached houses priced between RM363,000 and RM800,000. They are expected to be ready by November next year.

Chew said Ibraco would maintain property development as its core business, adding that there was no plan to diversify into other businesses.

The company has a landbank of about 285ha in Sarawak more than 50% of which is in Kuching.

“We are on the lookout to increase our landbank,” he added.

Last week, the company announced its proposal to sell a piece of land in Kuching for about RM14.2mil. Chew said the proceeds would be used for its working capital.

He said Ibraco, which completed its regularisation scheme a week ago, was expected to exit the PN17 category in the second half of this year.

After the completion of the regularisation, the company is required to report profits for two consecutive quarters.

Ibraco was classified a PN17 company after its revenue for the financial year ended Dec 31, 2009 fell below 5% of its paid-up capital.

Chew said Ibraco, which has a paid-up capital of nearly RM99.5mil, settled all its bank borrowings of RM12mil last week, and had zero gearing now.

The company's single-largest shareholder is Sharifah Deborah Sophia Ibrahim, with a 21.7% stake. Sharifah Deborah is the daughter of Ibraco founder, the late Wan Alwi Ibrahim whose family once owned more than 60% of the company.

The other substantial shareholders are newly-appointed executive director Datuk Wee Song Ching (16.79%), Singaporean Ng Cheng Chuan (16.61%) and Chew (11.51%) through his firm Hiap Ghee Seng Sdn Bhd and a direct stake.

By The Star

BEIJING: Beijing authorities plan to build a "seven-star hotel" modelled after Dubai's Burj Khalifa - the world's tallest building - in a US$1.3 billion (US$1 = RM3.07) joint project with Saudi Arabia.

The hotel will be erected in western Beijing's Mentougou district some 30 kilometres from the Chinese capital's centre, the state-run Beijing Morning Post said in a Thursday report, quoting a local parliamentary meeting.

A district official, who declined to give his name, confirmed the project and its price tag in comments on Friday.

He said that the Saudi side was expected to foot the entire bill but he refused to provide other details, such as why such an expensive project would be located in the underdeveloped rural area.

The Beijing Morning Post said the building's design would be patterned after the 828-metre Burj Khalifa's distinctive slender, tapering design, but did not say how tall the planned structure would be.

The "seven-star" classification is not officially recognised internationally, as no formal body awards ratings above five stars, but there are a handful of luxury hotels around the world that still use the distinction.

Dubai's Burj Al Arab is one such establishment, and in Beijing, the Pangu 7 Star Hotel built near the 2008 Olympic stadium also claims the rating.

By AFP