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Saturday December 1, 2012

Big plans for WCT Land

WCT’s planned shopping mall and hotel – mixed commercial development along
Jalan Skudai, Johor Baru. WCT’s planned shopping mall and hotel – mixed commercial development along Jalan Skudai, Johor Baru.

WCT Bhd (WCTB) executive director Choe Kai Keong is excited about the growth prospects for the group's property development, investment and management businesses in the next decade.

“There are so many things happening. In terms of future projects and plans, we are at very exciting times for the property business,” says Choe. He says that the group has set a target to grow its property businesses to be as signficant as its mainstay construction arm within five years.

“Now, WCT Land is being overshadowed by our construction arm. But in the last few years, we have grown the property business to a substantial size. It is bigger today, compared with when WCT Land was listed (on Bursa Malaysia) from 2004 to 2008,” Choe told StarBizWeek.

WCT Land Sdn Bhd is the property development arm of the group, which is better known for its construction and engineering projects in Malaysia and the Middle East.

In its 2011 annual report, the group pointed out that it has completed more than 300 construction projects valued at RM19.8bil over 30 years and has operations in Qatar, United Arab Emirates, Oman, Bahrain, India, Vietnam, China and Malaysia.

For the financial year ended December 31, 2011, the group's construction arm contributed 64% of its RM257.45mil operating profit.

The balance came from its property development (21%) and property investment and management (15%) divisions.

Choe says the group is aiming to grow its property development division to a level where it will contribute 30% of operating profit by end-2016, while the property investment and management division will contribute 25%.

“That means, by end-2016, the property arm will be the major earnings contributor to the group.”

This ambition is also the reason behind the group's recent proposed internal reorganisation to clearly separate the construction and property divisions.

In October, WCTB had proposed an internal restructuring where a new investment holding company WCT Holdings Bhd (WCTH), will assume the listing status of WCTB.

The exercise includes the transfer of WCTB's entire shareholding in WCT Land, its wholly-owned subsidiary, to WCTH. The effective percentage shareholding of WCTB shareholders would be unchanged before and after the proposals.

The proposed internal restructuring is expected to be completed by the second quarter of 2013.

Choe says once the the group's property businesses grow to a certain size, the re-listing of WCT Land might become an option.

“We have not really looked into it. We also do not rule out the possibility of a REIT (real estate investment trust). We are still building the foundation,” he says.

In the past 15 months, WCTB has gone on a real estate acquisition spree and announced deals worth more than RM700mil in the Klang Valley and Johor.

This has resulted in the group's undeveloped land bank more than doubling to about 1,076 acres in Malaysia, with the bulk in Rawang (468 acres) and Bandar Bukit Tinggi, Klang (345 acres).

This undeveloped land bank is projected to have a gross development value (GDV) of more than RM13bil over the next five to 10 years.

“This is based on conservative numbers, so we think that there will be a lot of upside,” says Choe.

The most valuable jewel in the crown here is 57 acres of freehold land in the Overseas Union Garden or OUG area, Kuala Lumpur which is planned for a mixed development with a RM4bil GDV.

WCT also recently acquired 22 acres in Inanam, Sabah which is planned for a landed residential development.

The group is also expanding its presence in Iskandar Malaysia, the economic growth corridor of Johor.

It recently signed a 99-year lease purchase deal with Medini Land Sdn Bhd, a subsidiary of Iskandar Investment Bhd, for an 18.12-acre land for RM99.47mil.

The land, situated in Medini North in Johor, will be used for a proposed mixed commercial development with an estimated GDV of RM1.5bil.

The development which comprises offices, retail spaces and apartments will be carried out over the next five years.

A recent ECM Libra Investment Research report points out that despite WCTB's recent land acquisition spree which would require future cash outlay, its management is still comfortable with the group's future net gearing (currently 0.46 times).

“WCTB has a medium term note facility of RM1.6bil and management has guided an incremental debt of about RM680mil, raising net gearing to 0.5 time, which is way below management's comfortable net gearing level of 1.0 time,” says the research unit.

WCTB also plans to build up its recurring income segments by developing and managing shopping malls as well as hotels in selected locations.

It presently owns and operates the four-star 250-room Premire Hotel in Klang South, as well as the Paradigm Mall in Petaling Jaya.

It has also leased the Aeon Bukit Tinggi Shopping Centre to retailer Aeon Co Bhd.

Choe says WCTB wants to replicate its Paradigm Mall integrated commercial and residential development in Petaling Jaya at its OUG site in Kuala Lumpur as well as at an abandoned shopping mall site in Johor Baru.

In Johor Baru, WCTB will redevelop a 12.4 acres of freehold commercial land with an abandoned shopping mall, which it had bought in August for RM180mil from Malaysia Building Society Bhd.

Choe says the shopping mall in Johor Baru will have a NLA of 770,000 sq ft with 3,400 car park bays, and its redevelopment is targeted for completion in the fourth quarter of 2014.

Another Premire Hotel with 430 rooms is scheduled to be completed in 2016 at the shopping mall site in Johor Baru.

“We will have serviced apartments at the Johor Baru site with a GDV of RM900mil. The trend is towards integrated developments that provide the convenience of having a home next to a shopping mall and offices.”

Choe is also looking forward to May 1, 2013 when the group's Gate-way @ Klia2 will be officially opened.

Gateway @ Klia2 is an integrated complex with a transportation hub, a shopping mall with NLA of 350,000 sq ft and 6,000 car parking bays at the new low cost carrier terminal.

WCT has a 25-year concession agreement with Malaysia Airports Holdings Bhd (MAHB) to manage, operate and maintain the integrated complex which was constructed for RM530.3mil under a build-operate-transfer deal.

WCT and MAHB have a 70% and 30% stake respectively in the concession deal, which has an extension option for another 10 years after its expiry on Aug 1, 2036.

Choe points out that under the current plans, WCT would have five shopping malls with a combined NLA of 3.8 million sq ft and four Premire hotels with a combined 1,430 rooms within the next five years.

With the exception of the Aeon Bukit Tinggi Shopping Centre, the other malls will be managed by WCTB.

“We will try to have office and residential components together with the shopping malls and hotels wherever possible. This is the direction we are heading in,” says Choe.

According to Choe, Paradigm Mall in Petaling Jaya has achieved an occupancy rate of 96% and receives 25,000 visitors per day during weekdays and 50,000 visitors per day during weekends.

“The mall is getting over one million visitors a month since its opening in May. We can improve, and hope to hit 1.5 million visitors in the future.”

He says office towers at the Paradigm Mall site will be completed in 2015, while work on a 350-room Premiere business hotel and serviced apartments are due to start in March 2013.

The 12-acre Paradigm Mall site will eventually have a GDV of RM1.4bil.

On track

WCTB is also on track to meet its property sales target of RM700mil this year, as it has recorded RM620mil in sales year-to-date and stronger sales are expected in the fourth quarter from its Bandar Bukit Tinggi Township development projects, says ECM Libra Investment Research.

The group's future earnings stream is also underpinned by unbilled sales of RM519mil as at end-September while its commercial development The Landmark @ Bandar Bukit Tinggi 2 (GDV of RM180mil) was launched this quarter with a take-up rate of 70%.

The Landmark retail offices @ Bandar Bukit Tinggi 2 is located adjacent to the Aeon Bukit Tinggi Shopping Centre.

The research unit also notes that property developments with a combined GDV of RM1.6bil will be lined up for launch in the first half of 2013.

“Based on current momentum, WCT's property sales in 2013 are likely to surpass that of this year,” says ECM Libra Investment Research.

The group's property sales this year have been driven by the 1Medini residential condominiums in Johor, which had contributed about RM300mil in sales as at end-October, with the balance coming from residential property launches in Bandar Bukit Tinggi townships in Klang.

WCT Land general manager of sales and marketing Stewart Tew says 90% of the 644 units at 1Medini, which has a GDV of RM400mil, has been sold since the project's launch in the first half of this year.

Average prices for 1Medini units range from RM550 to RM600 per sq ft.

Tew says the strong sales of 1Medini was helped by the completion of catalytic projects such as Legoland, Newcastle University of Medicine, Family Indoor Theme Park and the Medini area's exemption from restrictions for foreign buyers, such as the minimum floor price of RM500,000 for a residential property bought by foreigners.

About 40% of 1Medini buyers are from Singapore, Japan and Indonesia.

In the pipeline for 2013 are launches of service apartment and retail units located adjacent to the Aeon Bukit Tinggi Shopping Centre, service apartments at the Paradigm Mall, bungalows and semi-Ds at a 56-acre site adjacent to Bandar Bukit Tinggi in Klang, service apartments in Bukit Jelutong (Shah Alam) and Medini Signature condominiums in Iskandar Malaysia.

Medini Signature which consists of 456 condominium units in two towers, with a GDV of RM400mil, is due to be launched before end-March 2013.

The leasehold units, sized from 650 to 2,040 sq ft, will be priced from RM600 to RM650 per sq ft.

Medini Signature will feature facilities such as an infinity edge pool with jacuzzi and resort style cabanas, a large children's pool with “beach like” entry and water toys for added fun, a floating gym, a yoga deck, tennis court, open lawn with barbeque facilities, children's cycling track and rooftop gardens.

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