INDUSTRIAL space letting company Dynamic Pillar (M) Sdn Bhd (DPSB) seeks to further expand its business. It expects to invest RM100mil in new projects in the next two years, according to its managing director Abdul Hamid Bawal.
We are currently in the preliminary stage of negotiations with several parties, he said, adding that the company was looking at expansion as there was still a lot of potential in the industry.
To maintain the flexibility of their operations, many companies would rather lease the space for their operations than commit their investments in buying land and building, he said. He added that this change in mindset would augur well for DPSB.
Hamid expects most of the projects currently under negotiation to materialise and be completed by 2005. With this, he sees DPSB easily achieving 30% growth in business by then.
Since its incorporation in 1991, DPSB's main business focus has been the leasing of industrial space. The company develops the industrial space to client requirements, but does not manage the operations.
DPSB currently owns a warehouse on 25 acres in Bukit Raja, Klang, which is leased to Nestle Products Sdn Bhd to house its national distribution centre.
Hamid said the company won the Nestle contract in 1998 mainly due to its innovative rental concept and emphasis on quality. We offered our rental charges on a yield basis, or as a return on investment of construction, instead of cost per sq ft, he said.
According to him, the warehouse features one of the most recent advances in floor technology. The warehouse's flat floor surface enhances efficiency and performance as well as reducing the need for high-cost maintenance, he said.
Hamid said the warehouse was extended in December last year to cater to Nestle's needs, the built-up area increasing to 800,000 sq ft compared with 630,000 before.
The extension has been completed and would be handed over in June, he said, adding that the company's investment in the extension was RM13mil. This brings DPSB's total investment on the warehouse, including land and buildings, to RM115mil.
Another achievement which Hamid takes pride in is the long term AAA-rating assigned by Rating Agency Malaysia Bhd (RAM) to DPSB's RM85mil Al-Bai Bithaman Ajil fixed rate serial bonds. He said Islamic bond was chosen due to the lower cost. According to Hamid, DPSB obtained about 50% savings on its financing cost compared with conventional bank financing.
Besides the cost, we also realised that the company had the potential to obtain an AAA-rating for the bonds, he said, adding that it was a big challenge for DPSB, as only a handful of established companies had obtained such a rating.
With the rating, the bonds were judged to be of the best quality and offered the highest safety for timely payment of financial commitments, he added.
Hamid said the bonds were fully subscribed and the funds would be used to set off existing loans and to fund the extension of its warehouse.
According to RAM, the rating reflected the structural features of the bonds, which captured all rental proceeds made by Nestle into designated accounts pledged to bondholders.
The rental income from Nestle is well-assured given the fixed rental schedule and the irrevocability of the 12-year lease agreement, it added. The lead arranger for the bonds was Aseambankers Malaysia Bhd.
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