IF you were to view The United Malayan Land Bhd's (UM Land) web page, you would be greeted with the saying:
Like the tree, UM Land grows on deep, strong roots so it may bear rich fruit.
To some, this may seem like an inflated statement as UM Land seems to have practically vanished from the league of “darling, aggressive and cash-rich” stocks in which it used to be back in 2000.
The company was riding on a high wave with its brisk sales from launches such as its project in Bandar Seri Putra in Bangi.
“Back in 2000, I believed the stock offered value for investors with a long-term view,” says an analyst who used to track the counter. Three years ago, it was trading at approximately RM3.90. Analysts were recommending the stock with return net asset value (RNAV) of RM5.00 per share. Today, the stock is trading on a dismal RNAV of about RM1.81.
So, what happened to this so “hot stock”?
Of course, UM Land's current situation has also not been helped by the sluggish property market. Whilst the residential and hotel sectors provided some cheer to the 2002 Kuala Lumpur property market scene, other sub-sectors remained considerably inactive.
This was largely due to the oversupply situation and the present economic climate. Both the office and retail markets face similar problems with the surplus expected to take some time to clear.
What else could be in store for UM Land if not lethargy and stagnation?
Surprisingly, despite the gloom, UM Land seems to have designs of being among the top property companies in Malaysia. A reliable source says that UM Land plans to revive its indolent situation by continuing with its township projects. UM Land also has the edge of not needing to start developing townships from scratch.
The Bandar Sri Alam project, for example, has been around for more than 10 years. Remaining developments should stretch until 2005. This township has an estimated gross development value of RM5.8 billion.
“These townships provide a stable income stream,” he says. He reveals that UM Land is looking at certain projects although it cannot be revealed just yet. UM Land's other key projects include the 898-acre Bandar Seri Putra township in the Klang Valley.
Primarily, UM Land is involved in property development. The completion of a restructuring scheme in 1995 marked the major transformation of the group's mainstay flour milling business to property development.
The restructuring scheme involved the disposal of its entire flour milling business and the reverse-takeover and backdoor listing of Seri Alam Properties Sdn Bhd, the developer of the 3,700-acre fully integrated self-contained mixed development township, Bandar Seri Alam in Johor.
Currently, the source says that UM Land would be considered an asset to Pernas, mainly because it is still profitable. Whether or not it is a great asset is, however, debatable.
The property analyst agrees. “Its projects in Johor are on the wrong side of interest. The townships in Pasir Gudang are located towards the industrial area, which generally do not generate much appetite among buyers. Two years back, UM Land was saddled with unsold projects over there.”
The same can be said about its townships in Selangor. Its townships in Klang and Bangi are not located in prime areas.
One thing for sure is that UM Land will not be moving from its core business of township development. It is understood that UM Land might try to complement existing township developments with niche townships like the new Seri Bukit Ceylon serviced apartments in Kuala Lumpur.
Recently, UM Residences Sdn Bhd signed an agreement with The Ascott Group to jointly operate a serviced residence, Seri Bukit Ceylon. UM Residences, a wholly-owned subsidiary of UM Land, is the developer of Seri Bukit Ceylon, comprising 247 apartment units in a 25-storey building in Kuala Lumpur's Golden Triangle.
UM Land expects to generate RM80 million from sales of these apartments.
For UM Land's financial year ended Dec 31, 2002, it registered a revenue of RM135.37 million compared to RM150.52 million in the same period of the previous year. Net profit increased marginally to RM10.14 million from RM10 million.
Another interesting development is the fact that major shareholder of UM Land, Pernas International Holdings Bhd, may have plans to rejuvenate its 32 per cent associate company.
According to press reports, property assets worth RM700 million may be injected into Pernas. This could be the key to unlocking value for UM Land.
Pernas has been trying to pare some of its RM2.5 billion debts, and recently sold its stake in Menara ExxonMobil for RM131 million. A change in its shareholding structure last January saw the group moving to tycoon Tan Sri Syed Mokhtar AlBukhary’s stable of companies.
It is believed that Pernas will undergo a massive restructuring to streamline and reorganise its sugar, plantation, hotel and property businesses, hence breaking up the group and its subsidiaries into respective core operations. Pernas has two major listed subsidiaries – 54 per cent owned Tradewinds (M) Bhd (Tradewinds) and UM Land.
Rumour has it that Syed Mokhtar has vast land bank in Johor Bahru that he intends to pump into a listed vehicle. The property analyst say that UM Land would appear to be the most likely candidate at the moment.
The property analyst says that Pernas definitely has plans to consolidate its operations and slash its debts. The group, which is in the midst of reorganising its wide-ranging businesses, would need to pare down its massive debt of RM2.57 billion to achieve the target.
“There is a need to do so. I would envisage that Syed Mokhtar would want to restructure the whole group. Currently, Pernas has no strong focus, and is only regarded as the poorer cousin of Sime Darby Bhd.
“I am sure Syed Mokhtar would do something on the property division and would not allow UM Land to languish,” says the analyst.
Pernas incurred a higher net loss of RM176 million for the year ended Dec 31, 2002 on the back of a higher turnover of RM1.1 billion. The hotel and property group’s net loss figure was over 59 per cent higher compared to the same period in the previous year.
However, turnover increased by 6.4 per cent against the preceding period.
Moving forward, however, analysts feel that Pernas would still be concentrating more on its hotel and plantation business as compared to its property division.
The prime concern, however, would be for Pernas to first de-gear.
“I don't see how Pernas can help UM Land without first reducing its debts. That should be Pernas' primary concern,” says the property analyst.