FAVORABLE results from the shift into higher-end property projects are beginning to show up in Talam Corp Bhd's financial books and analysts are optimistic of the group's earnings prospects over the next two to three financial years.
According to a foreign research house, Talam, which has sold 4,881 property units worth RM730.4mil in the first six months in the current financial year (FY) ending Jan 31, 2005, should have no problem meeting its target sales of RM1.5bil, as traditionally, the second-half year tends to be better than the first-half.
Up to Sept 5, sales of close to RM900mil have been recorded.
“The unbilled sales of RM1.2bil to RM1.3bil suggested that close to 68% and 35% of our FY05 and FY06 profit projections are already locked in, respectively.
“We are projecting net profit of RM117.9mil in FY05, RM138.1mil in FY06 and RM165.1mil in FY07,” a senior analyst said.
In the first-half year ended July 31, Talam recorded a 36.3% increase in net profit to RM50.7mil compared with the previous corresponding period, while revenue was slightly higher at RM580.3mil from RM570.3mil previously.
Projects in the southern and central regions of the Klang Valley, including Saujana Damansara, Puncak Jalil, Lestari Puchong, Lestari Permai and Ukay Perdana I, were the biggest earners.
The group's balance land bank in ongoing projects comprises 7,067.5 acres worth a total gross development value (GDV) of RM9.2bil. Those designated for future development are 6,596 acres that have a potential GDV of RM11.7bil. Talam has about 29 ongoing and new projects with total GDV of RM21bil.
Some of its other ongoing projects are Ukay Perdana, Bukit Pandan, Saujana Selayang, Putra Perdana, Lagoon Perdana, Kinrara Perdana, Saujana Puchong, Saujana Putra and Jalil Heights.
“Given its large number of projects, the group can switch emphasis on projects and vary the products mix to meet market demand. As the leading developer of affordable homes, Talam is well placed to sustain its sales and earnings,” the analyst added.
The group has also proven to be a resilient developer, having sold 11,505 units during the recession of 1998 and 13,469 units during the economic slowdown of 2001.
Since the completion of the merger with Europlus Bhd in November last year, the group is now on a stronger financial footing.
Its gearing level has fallen from 186% in FY ended Jan 31, 2003, to 117% in FY 2004.
The corporate exercise involving Talam and Europlus resulted in all the property divisions under the two groups being consolidated under Talam. A new company, Kumpulan Europlus Bhd (KEB) is managing all the non-property related businesses comprising construction, infrastructure, manufacturing and plantation.
KEB is now the parent company with Talam as its 49% associate company.
The financial restructuring exercise also saw the enlargement of Talam’s land bank to 13,663.5 acres in the Klang Valley.
Another analyst with a local brokerage said with such sizeable land bank in the Klang Valley, which happens to be the most robust markets in the country, Talam was well placed to benefit from the strong demand for a broad-based of residential properties.
Excluding the less popular projects in the northern region such as Bukit Beruntung and Bukit Sentosa, Talam still has 4,386.5 acres with a GDV of RM10.3bil in the central and southern regions. The land bank will keep the group busy for the next six to seven years.
In line with the group’s focus in high-end projects, Talam executive chairman Tan Sri Chan Ah Chye said projects that had been earmarked for launch in the next three quarters, including Selayang Bestari, Ukay Perdana II and Canal City, would be properties in the upmarket range.
“With the strong buying interest for high-end residential properties, Talam’s venture into the high-end property projects is most timely and will be able to contribute significantly to the group’s projected growth,” he added.
Chan said based on a 12-year property cycle, the market should be good for the next five years. Coupled with supporting factors such as low interest rate and growing population, demand for houses would continue to hold good.
Talam also expects over the next two to three years to reap the benefit from a 15% to 20% drop in construction cost, mainly as a result of adopting engineering construction methods such as prefabricated building system in its projects. This has led to shorter construction time and savings in material and labour costs.
“Since we launched our group-wide quality initiatives, the displacement of errant contractors has resulted in 60% of the jobs being undertaken by KEB Builders, a subsidiary of Talam's parent, KEB. This would also lead to cost-savings as KEB is well regarded for pioneering value engineering system,” he added.