AT a glance, it's hard to imagine why UDA Holdings Bhd is one of the most under-rated listed property companies in the country.
It is cash rich, owns land in prime areas of the Klang Valley, Penang and southern Johor, which other builders hanker after, and has chalked up steady sales in recent years despite a soft property market.
UDA Holdings is also much sought after. Just as the deal inked between UDA Holdings' major shareholder Landas Utama Sdn Bhd and Gold Bridge Engineering & Construction Bhd fell through late last year, two suitors swooped in to buy the private company that owns a 24.93 per cent interest in UDA Holdings. The loss of Gold Bridge and Tan Sri Syed Mokhtar Albukhary, as it turned out, became the gain of MALAYSIAN RESOURCES CORP Bhd.
What then explains the disenchantment among the investment fraternity?
The biggest beef seems to be UDA Holdings' sluggish or perceived to be sluggish nature. “Inertia ... it takes a while for the company to complete a project,” says one market observer.
“It is still very much a semi-government organisation. Unlike the Sime UEP and IOI Properties of the world, UDA (Holdings) hasn't given the impression of being an aggressive player in the property market. True, the company has a huge land bank in prime locations but it sometimes takes years for projects to take off,” says another.
This trait, most opine, has to do with the amount of bureaucracy involved. UDA or Urban Development Authority was originally a government agency set up to promote planned urban development and bumiputra economic participation in urban areas. The agency was subsequently corporatised in 1996 with the Minister of Finance Inc. (MoF) as its holding corporation.
Prior to its listing in November 1999, a management buyout saw nine senior UDA managers, led by managing director Datuk Abdul Razak Hussein, buy a 24.93 per cent stake in the company from MoF for RM132 million. Landas Utama Sdn Bhd was used as the vehicle for the buyout. MRCB is now set to acquire the entire interest in Landas Utama.
Currently, the company has a net cash pile of RM160 million. It will have another RM120 million in its coffers once it completes the sale of its 41 per cent stake in associate company West Country Sdn Bhd to Magnum Corp Bhd. UDA Holdings' shareholders will vote on the proposed disposal at an extraordinary general meeting on Monday.
Another observer, however, appears to be more forgiving: “So it takes a while for the company to complete a project. The important thing is it never fails to do so and most, if not all, of its projects have generated good cash flow for the company over the years.”
However, this still doesn't disguise the fact that UDA has done little to make itself savvy in terms of both public and investor relations.
“What it lacks is branding. You never find UDA Holdings stamped all over Pertama Complex, BB Plaza, Dayabumi or any of the other properties it manages or has developed. And as far as remaining visible to investors go, UDA would do well taking a leaf out of YTL Corp's book,” says property consultant Previndran Singhe of Zerin Properties Sdn Bhd.
It is not a secret that MRCB has plans to go into property development in a big way. UDA Holdings, on its part, has a land bank of some 2,500 acres, of which about 1,000 acres is freehold, and some 640 acres has been approved for residential, commercial and industrial development.
Most of the land it holds is located near or in major towns and cities. Thus, not surprisingly, many of its township projects have proven to be successful and have contributed significantly to the company's earnings.
A case in point is UDA's highly successful Taman Tun Dr Ismail township in Kuala Lumpur. According to a property consultant, the first few phases of single-storey link houses in the area were sold for between RM30,000 and RM35,000 in the late 70s. The same houses now fetch a price of more than RM300,000.
Then there is also its Bandar Tun Hussein Onn project in Cheras and Bandar Baru Bertam in Penang. The latest addition to UDA's portfolio of property development projects hasn't shown signs of disappointing either.
In 1991, a wholly-owned subsidiary of UDA introduced the Bandar UDA Utama township in Johor to the market with the launch of 191 single-story terrace units. These were apparently snapped up within a matter of weeks owing to the township's strategic location along the second link highway and its proximity to Johor Bahru.
The 491-acre self-contained township, once fully completed in 2011, will contain more than 5,000 residential and 515 commercial units. The sales value of the project is estimated to be RM1.03 billion.
Clearly, MRCB is aware that a strategic stake in UDA, via Landas Utama, will provide opportunities for the two companies to form joint ventures and develop properties in prime locations.
Since the proposed purchase was announced in January, the talk in town is that MRCB will most likely inject its KL Sentral project into UDA Holdings in the future. Once again, the financial wisdom behind this move is easy to grasp. Cash-rich UDA Holdings will be able to reduce MRCB's financial burden of developing KL Sentral.
Furthermore, the development and management of landmark commercial properties is not new to UDA Holdings. Although residential development accounts for more than half of UDA Holdings' revenue, the company also derives a steady income from property management (20 per cent), retail (24 per cent) and hospitality (3 per cent).
Some of its more prominent assets include the Pudu Raya bus terminal, Sinar Kota, Cahaya Suria, BB Plaza and Pertama Complex in Kuala Lumpur and Plaza Angsana and Menara Jati in Johor Bahru. It also owns the Impiana Hotel Kuala Lumpur and UDA-Ocean department stores.
For the financial year ended Dec 31, 2002, UDA Holdings reported a net profit of RM36 million, up from RM30.95 million a year ago. Turnover was also marginally higher at RM491.50 million in the 2002 financial year, compared with RM488.34 million previously.
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