RM1.1bil GDV seen

KUALA LUMPUR: Analysts have estimated that the high-rise mixed development to be built under an agreement between UEM Sunrise Bhd and Telekom Malaysia Bhd (TM) will have an estimated gross development value (GDV) of about RM1.1bil.

AmInvestment Bank Research said the GDV assumption was made based on a plot ratio of 10x, market value of RM2,500 psf and an efficiency ratio of 60%.

The land value was tagged at between RM147mil to RM150mil as at Dec 31, 2014, based on two valuers,it said.

On May 27, the companies had announced the agreement to develop the property on two adjoining parcels of freehold land measuring a total of 1.69 acres belonging to TM.

The parcels of land are located along the southern side of Jalan Raja Chulan here, within walking distance of Menara Maybank, Menara Olympia, Bursa Malaysia building, Telekom Museum and SEGi College Kuala Lumpur.

Collectively known as Bukit Mahkamah land, it has a total net book value of RM35.88mil, based on TM’s latest audited financial statements as at Dec 31, 2015.

In its recent announcement to Bursa Malaysia, the telecommunications giant said the parcels of land are also close to public transport facilities such the Pudu Sentral, Masjid Jamek and Plaza Raya LRT stations.

One of the pieces of land currently has an 11-storey office building, with a two storey annexe building, which is about 40 years old and is being used by TM as office premises, while the other is a parking lot used by its employees.

Under the agreement, UEM Sunrise’s indirect unit, Sunrise Quality Sdn Bhd (Sunrise Quality) will develop the project, over an expected span of six years.

Sunrise Quality will pay TM a guaranteed land cost of RM150mil or RM2,037 psf, over a period of 16 months as well as a 5% share of the gross development value of the project to be determined later.

The land value was tagged at between RM147mil to RM150mil as at December 31, 2014, based on two valuers.

According to AmInvestment Research, a 5% share in the GDV would raise the land’s selling price to RM205mil, or RM2,784 psf.

Given the location it said the selling price was fair, compared to the Retirement Fund Inc’s acquisition of Tun Razak Exchange land at RM2,300 psf, while Tabung Haji paid RM2,774 psf last year.

Based on a net book value of RM36mil, it estimates an initial one-off net gain of RM87mil for TM from this transaction, or 9% of FY16F earnings.

“We are mildly positive on this development, which unlocks TM’s asset values and marginally enhances its return on equity,” it said.

The research house maintained its “hold” call on TM with an unchanged DCF-derived fair value of RM7.20 per share.