PETALING JAYA: It is in challenging times that silver linings appear. This could be the case for medium-sized property and construction company Fajarbaru Builder Group Bhd , which is not only coming from a small base but has found itself a new growth avenue in the Land Down Under.
Fajarbaru looks set for a better 2017, not only because earnings from its maiden Australian project will start contributing in the first half of 2017 but also because it is increasingly upbeat about the Australian property market and is expanding its investments there.
Just two weeks ago, Fajarbaru’s associate company in Australia proposed to acquire a parcel of 676-sq-m (0.17 acre) freehold land in the central business district of Melbourne for A$25.6mil (RM84.13mil).
“In the immediate future, Melbourne is one of the cities where we will look for growth. Melbourne is one of the preferred city in the world for education and residence and we believed the city will continue to attract people from all over the world.
“Investors, migrants and owner occupiers are our main target audience,” said Fajarbaru group chairman Datuk Low Keng Kok recently.
Fajarbaru’s indirectly-owned associate, 320 Queen Street Project Pty Ltd (320-Q), has entered into a contract to acquire the land, which comes with a permit for “the construction of a 48-level residential tower including two basement carpark levels, two recreational levels and service levels” from Oct 29, 2017, to Oct 29, 2020, from an unrelated party, The Celtic Club Inc.
Property development company 320-Q is a 50%-owned associate company of BFB Project Pty Ltd, which in turn is a 44.44%-owned associate of Fajarbaru.
“The developments surrounding the land in Melbourne is the 7.2 ha park at Flagstaff Gardens. It is also within walking distance to the University of Melbourne and RMIT University, Melbourne’s bustling retail core and prestigious legal precinct,” said Low.
He added that the development benefits from its direct access to all forms of public transport in Melbourne Central station, Flagstaff Station, bus and tram network along Queen and La Trobe Streets, including a stop at its very doorstep.
The City of Melbourne currently hosts a record 68,000 students, up 11% since 2012, while tourism brings in 11.2 million visitors and drives hotel occupancy rates to an average of 86%.
“Fajarbaru will contribute about 22.22% of the purchase consideration, or A$5.69mil (RM18.7mil), and fund the acquisition through internally generated funds,” said Low.
This Melbourne project is expected to start contributing to Fajarbaru’s bottom line in 2019.
Meanwhile, Fajarbaru’s other existing Australian project is The Gardenhill in Melbourne, which has achieved 84% sales and is on track to be completed by year end. This project has a gross development value (GDV) of approximately RM231mil (A$77mil).
“Margins are good for this project and we will see some contributions to earnings by the first half of 2017,” said Low.
Back home in Malaysia, Fajarbaru will be kept busy with two property projects, comprising its condominiums in Puchong with a GDV of RM400mil and its serviced apartments in Sentul (RM270mil).
In the first half of 2017, Fajarbaru is looking to launch its Rica Residence development in Sentul. The project comprises 473 units of serviced apartment and is located near the intersection of Jalan Perhentian and Jalan Sultan Azlan Shah (formerly Jalan Ipoh), and is within walking distance to the future Sentul West MRT station.
In the second half of 2017, it expects to launch the Rica Residence in Kinrara. This comprises 475 units of condominiums and 204 units of medium-cost apartments all under one roof, although distinctly separated. GDV is approximately RM400mil.
Also in the second half of 2017, Fajarbaru expects to launch its Melbourne central business district development.
For its first quarter to Sept 30, 2016, Fajarbaru’s net profit jumped 58.1% to RM4.39mil on the back of a 42.35% drop in revenue to RM63.06mil. The company’s cash position increased to RM41.4mil from RM33.69mil for this period.
For its financial year ended June 30, 2016, Fajarbaru turned around and recorded a net profit of RM11.62mil from a previous loss of RM2.59mil. Revenue was up 9.4% to RM423.91mil.
Its order book for construction currently stands at RM350mil.
At its current price of 57.5 sen, Fajarbaru has a market capitalisation of RM208mil. It is presently trading at a historical price/earnings ratio of 14.63 times and is also trading below its book value of 64 sen. The stock is up 11.65% on a year-to-date basis.
It has long-term term debts of RM12.37mil and short-term debts of RM96.52mil. Compared against its paid-up equity of RM361.7mil shares, it has a gearing level of some 30%.
It recently announced an interim dividend of 2.5 sen for the year ending June 30, 2017. The stock has a gross yield of 2.17%.
Moving forward, Low said the group would continue to actively bid for local construction jobs. It is currently tendering for some RM5bil worth of jobs.
In August, Fajarbaru secured a contract worth RM20.96mil for the construction and completion of the Kuantan Port City link road in Pahang.
In May, it secured a RM11.68mil contract from Malaysia Airports (Sepang) Sdn Bhd for the redevelopment of air cargo handling facility at the low-cost carrier terminal in Sepang.