The Star Online: Business
The Star Online: Business |
| Posted: 08 Sep 2012 03:41 AM PDT I-BHD founder and executive chairman Tan Sri Lim Kim Hong has been in business for a great many years. Yet, he never fails to light up at the mention of his pride and joy the ambitious, steadily forming township of i-City. With the exuberance of a young man, Lim, 62, is likely to take you by the hand and break into a short sprint as he points out upcoming attractions at his RM5bil, 72-acre development in Shah Alam, which was exactly what happened when StarBizWeek paid a visit there this week. Seven years hence, I-Bhd's flagship project is set to harvest the first fruits of its labour. Having made its name on the rows upon rows of LED-lit trees lining its streets, i-City is now a familiar backdrop to weekend family jaunts. However, its owners believe this is the year I-Bhd begins the transition to a serious player in property development. When finished, i-City will be many things to many people theme park, mall, hotel, residence, office and concert venue. "We have over the past few years been working behind the scene to get all the approvals and infrastructure in place. We have that today, and moving forward we are going to reap the efforts of our investments," group chief executive officer Datuk Eu Hong Chew asserts. The story of i-City stretches as far back as 1993, when Lim bought a parcel of land in Section 7 of the then sleepy Shah Alam at RM4 per sq ft. The freehold development is the brainchild of Lim, who has throughout his life been a trailblazer on many fronts despite adverse circumstances. The youngest in a family of 10 children, he dropped out of school after standard six and worked in a furniture-making shop in his hometown of Muar, Johor, as an apprentice. Lim later struck out on his own as a carpenter. At 21, he signed up as a mattress dealer with Dunlop and within a short time, he was the biggest dealer in the country. Soon after, Lim started Dreamland, Malaysia's first spring mattress brand, earning him the nickname "mattress king". Dreamland was subsequently listed in 1987 and Lim sold the business in 1993 for RM350mil. He invested the money in several regional ventures as well as in the land on which i-City sits. I-Bhd, which is 61.2%-owned by Lim, used to be a white goods maker known as Sanyo Industries Malaysia Bhd before he acquired and renamed it in 1999. But his technology-based township did not take off until 2005, hampered by the Asian financial crisis. Today, Lim has the state on his side, so much so that it agreed to build three flyover interchanges that will link i-City to the Federal Highway, making it only the second development to have exclusive access to the bustling expressway after Mid Valley. Not only that, the Shah Alam City Council has written to the Land Public Transport Commission requesting that one of the stations along the proposed Kelana Jaya-Klang line of the My Rapid Transit service i-City. With only 20% of the construction in place, large tracts of bare land still dominate the landscape of i-City, although if everything goes on schedule, this will not be the case for much longer. Day and night I-Bhd will spend the next 10 years realising the masterplan designed by Jon A. Jerde, whose portfolio includes the ritzy Roppongi Hills neighbourhood in Japan and SP Setia Bhd's KL Eco City. Lim and his team are working to create an "international business hub by day and lifestyle haven by night", the likes of which has no comparison in Shah Alam, and which many thought preposterous to do in a place better known for its sedate suburbia and factories than as a thriving nightspot. "The perception then was that no one wanted to invest in Shah Alam," recalls Eu, Lim's loyal aide of 20 years. Because of this, i-City was a tough sell. Lim, for example, had to contend with an initially miniscule plot ratio of 1:3 and approved built up of five million sq ft, which would not allow the company to maximise its potential. After much wrangling, Lim got the green light to raise i-City's plot ratio to 1:5, giving it a total gross floor area (GFA) of 13 million sq ft and RM5bil in gross development value (GDV). i-City was the first and still the only private sector-led MSC status zone in the state. It also signed a management and development agreement with the Selangor government to make i-City a "technopreneur campus", which comes with a host of incentives such as a temporary occupation licence for some 30 acres of neighbouring land, 24-hour operation for approved outlets, lower bumiputra sales quota of 30%, and the expanded plot ratio. "If you look at all the successful urban centres in the world, there is always a business as well as entertainment component. Look at Roppongi or Canary Wharf (in London). When you have both day and night activities, the place becomes vibrant," Eu explains. i-Appeal The quarter ended June 30 marked the first time I-Bhd recognised revenue from the residential portion of i-City in its books. Its turnover in the second quarter improved 63% to RM10.94mil from RM6.71mil in the same period last year, and net profit to RM2.97mil versus a loss of RM129,000, boosted by a three-fold increase in its leisure segment and a one-off gain of RM1.8mil from the divestment of its i-Home trademark. For the first half of the year, revenue climbed 73.5% to RM19.59mil from RM11.29mil, while net profit stood at RM3.79mil compared to RM294,000 of losses a year earlier. In the notes accompanying its financial results, the firm said it recorded a profit of RM7.6mil from its leisure operations during the six months to June, which was triple the RM2.2mil achieved in the previous corresponding period due to stronger revenue from its upgraded SnoWalk, more visitors to the LED Lightscapes and new theme park attractions installed in the final quarter of 2011. Nonetheless, Eu explains that the contribution from its leisure division, which has so far been I-Bhd's main earnings engine, should balance out as the company progressively receives cash from the sales of its residences. "We have only accounted for less than 5% of our unbilled sales in the second quarter," he points out. I-Bhd in May launched 173 units of the West Wing of i-Residence, which has been fully sold. It unveiled last month a further 173 units of the East Wing in addition to 20 villas. Also sold out were its 220 small office/versatile offices (Sovos), whose completion and handover is expected in two years. In terms of pricing, Eu says i-Residence has set a new benchmark in the area at RM500 per sq ft. Capital values in the vicinity, he adds, have appreciated in tandem. "When we were building in 2008, the semi-detached houses behind us were going for RM750,000 and RM300,000 for terrace homes. Now it has doubled to RM1.5mil and RM600,000. "We have demonstrated that there is demand for high-rise living in Shah Alam, which has historically favoured landed property. When we wanted to do this, people were sceptical. But we have proven that if you have a nice product and environment, high rise is possible." Of i-City's total 13 million sq ft, 8 million has been carved out for residential-type dwellings, 2 million for the mall and three hotels, and the rest for offices. I-Bhd is targeting to roll out some RM500mil worth of launches with one million sq ft of GFA and hit RM500mil in sales per annum. Eu calls i-City a "dual-track" project as the tourism and property development elements can operate independently of each other. "Every developer wants a recurring income stream, that's how the theme parks came about," he elaborates. "Once everything is done, we will also receive recurring income from the investment properties, namely the mall, hotels and carparks." Quantum leap By the middle of the next decade, after i-City has come to fruition, it is envisaged to have 30,000 knowledge workers, 25,000 residents and 40 million to 50 million visitors from five million now. And while the small office/home offices (Sohos) and Sovos make up a significant chunk of its residences at 5.2 million sq ft, or 40% of the total built up, Eu does not think there will be a crunch in demand, citing the growing number of technopreneurs who eschew traditional offices. In the near term, I-Bhd aims to launch 950 units of its RM300mil GDV Sohos in November alongside its Water World@i-City that will feature the country's only tornado ride. Also in the works are a luxury 43-storey condominium sited on 1.1 acres in Kuala Lumpur's Golden Triangle in Jalan Kia Peng, which is slated to be revealed in the first quarter of next year, and Clarke Quay @i-City, the working title for what will be its riverfront complex inspired by the Singaporean tourist haunt of the same name. "The authorities here are learning from Singapore and have decided to do away with the cemented banks of Sungai Rasau, which snakes past i-City. The plan is to widen and deepen the river to give it a natural look," Eu explains. The river will be the focal point for its leisure district comprising its one million sq ft regional mall, hotels, an amphitheatre and an F&B hub. For the rest of the year, Eu is confident that the company can maintain its growth momentum. He expects net profit to be double that of last year in the financial period ended Dec 31, 2012 (FY12) on the back of progressive recognition of unbilled sales from its apartments and better ticket sales from its rides and attractions with the looming year-end holidays. In a May report, Kenanga Research estimates that I-Bhd could see solid earnings growth in FY12 and FY13 of over 100% to RM11.4mil and RM24.3mil respectively. "For the past five years, the group has maintained its net cash position with a zero gearing balance sheet," adds the research house, which has a target price of RM1.51 for the stock. On dividends, Eu shares that there is potential for higher payouts in the future. It has been returning one sen to shareholders over the past two years for a yield of 1% to 3%. "Last time we were thinking about how to settle the problems. Now we will settle shareholders," Lim chips in. To the serial entrepreneur, this is more than a business investment. "It is not only about returns. Without love, this will not be successful. Without love, we would have surrendered," he says simply. "The challenge for us now," Eu sums it up, "is to continue to increase the GDV of i-City. We have 10 years left under the current plan. Our job is not to complete it, but to enhance it further so we will have many more years to go." |
| Posted: 08 Sep 2012 03:24 AM PDT Two things came as a surprise to the marketing consultant behind what will be the world's first Banyan Tree Signatures in Kuala Lumpur how quickly it was sold out, and more astoundingly, that most of its customers were Malaysians. "As you know, Malaysians are currently not a condo-buying group, especially when the price is high, and they usually prefer landed property," remarks Tracey Lai, the marketing director of 1 Pavilion Property Consultancy Sdn Bhd, which handles sales and marketing for the RM1.4bil high-rise due to be completed in 2015. Sandwiched between the Prince Hotel and Residence and Hakka Restaurant on Jalan Conlay opposite Pavilion KL, which some may remember as the site of the former Wisma MISC, Banyan Tree Signatures is well on its way to becoming the "most desirable add ress" in the capital, if its selling price and speed are any indication. Lumayan Indah Sdn Bhd is developing Banyan Tree Signatures on a 1.46 acre plot at the junction of Jalan Conlay and Jalan Raja Chulan. Set to tower over the Golden Triangle at a whopping 55 storeys, it will also be one of the tallest residential landmarks here. Lai tells StarBizWeek in an interview that while its average selling price per sq ft was RM2,000, which is already at the top end for its location, the highest transacted price came close to RM3,000 per sq ft for the smaller units at the upper floors. In terms of the rental, Lai reveals that Banyan Tree Signatures is expected to be priced at RM10 per sq ft or higher, eclipsing even Pavilion Residences' RM8 per sq ft. And for a development of its stature, Banyan Tree Signatures is sure to have courted some similarly high-profile, high net worth tenants. On this Lai is coy, holding firm to the confidentiality of her clients. "There were prominent people who bought this but we can't divulge," she says with a smile. "About 70% of our buyers were local and 30% from Japan, Hong Kong, South Korea, Taiwan, the UK, Middle East, and Singapore, as well as a smattering from Indonesia. We did approach foreign buyers but the local take-up was so fast. Many were actually referred to us." Lumayan Indah had, in fact, only signed the agreement with Singapore-listed Banyan Tree in October last year, after which some 80% of the private residences were snapped up within months. Storied brands The reason for this, Lai believes, is the confluence of the two brands backing the project Banyan Tree, known for its ultra-luxe spa resorts in various exotic locales, and Pavilion, owner of the award-winning shopping complex on Bukit Bintang. Banyan Tree will manage the hotel and spa itself, giving the added allure of the service and amenities the brand is renowned for. Imagine high ceilings, floor-to-ceiling windows, the tinkle of champagne glasses and warm glow of crystal chandeliers against an evening panorama of KL. Top that off with the ability to summon a limousine, yacht or even private jet through its concierge these are but some of the things in store for the owners. The single-block development consists of 441 private residences, 51 serviced residences and 50 hotel suites, which are located at the two uppermost floors. Like the apartments, the hotel will also be the most expensive in town, Lai says. The spa, a hallmark of Banyan Tree, will take pride of place on level 53. Plans are also in store for a rooftop deck with a gourmet sky bar and restaurant modelled after the Vertigo and Moon Bar of the Banyan Tree Bangkok. Lai explains that the private residences were mostly sold to investors, with owner-occupiers making up some 30%. "Our role does not end here (after the sale) as we will be looking at property management for the owners, for example if they are overseas or busy and need someone to care for and rent out their units." Banyan Tree ventured into residences six years ago, but the one here will be the first under its "Signatures" concept, a model centred around the development of mixed use residences that will allow the firm to maximise returns vis-vis single-use projects. How Banyan Tree got to where it is is the stuff of real estate legend. In 1984, Ho Kwon Ping, an ex-financial journalist and economics editor of the now-defunct Far Eastern Economic Review, along with his wife and brother, saw potential in a disused 600-acre tin mine in Phuket, Thailand. Following years of site rehabilitation, Banyan Tree's maiden resort was unveiled there in 1994, a precursor to the 30 hotels, 60 spas, 80 galleries, and two golf courses they own today. Couture living The next item on Lai's agenda is the Pavilion Couture Suites, the last piece of the puzzle for Pavilion KL. Situated on the corner between Chulan Square and the Westin hotel, the suites will be built exactly above the mall's retail floor, on which the street-fronting stores of Herms, Chopard, Versace and the rest currently stand. "The interesting thing is we have been getting enquiries even though there isn't much information about it," Lai says of the serviced residences, whose preview was on Thursday. The suites, 175 of them, will feature sizes ranging from 686 sq ft to 2,206 sq ft, with some 70% of them smaller than 1,000 sq ft, Lai points out. "We haven't determined the pricing yet, but it should be within RM2,500 to RM3,000 per sq ft," she says, explaining that this was originally intended to form Pavilion's hotel component, but those plans were shelved in favour of the demand for private residences. But with so many developments descending on the Bukit Bintang-KLCC stretch, most recently the proposal to build the Harrods Hotel right between Pavilion and Banyan Tree Signatures, is there cause for concern? "A prime location is where everything comes together," Lai retorts. "You can't have your own brand standing alone without the support of other brands. A consumer wants choice." "When you see many world-renowned brands converging in one place, it is a good sign, it means we have the potential to grow." Besides, she contends, the sheer force of big-ticket projects such as the RM26bil Tun Razak Exchange a few blocks away would only serve to enhance the appeal of the surrounding real estate. Buying local One thing Lai feels strongly about is how Malaysians sell themselves short when it comes to the local property market. "If you compare us to other global cities, we are at the low end. I just returned from Singapore and you're talking about S$3,000, S$5,000 and S$7,000 per sq ft in the central business district (CBD)," she quips. "Even in KLCC, we have been stagnant for a long time. We haven't moved from when we were hit by the financial crisis in 2008. My personal view is that the our CBD is very underpriced. "We hit the RM2,000 per sq ft level years ago and nobody has dared to push beyond RM3,000. Our banks got a little worried as well about our prices." The problem, she adds, is that buyers tend to put their money elsewhere without thinking everything through. "In my experience, a lot of our customers are Malaysian, yet they return here to purchase real estate. "At the end of the day, we all want to come home. And you don't want to be stuck with a property that is 14 hours away and that will cost you a lot of money to manage." As someone who interacts regularly with investors, Lai has seen how foreign property purchases can backfire. "A client of mine had her Melbourne apartment in the CBD revalued downwards by 10% at the point of completion. And when she decides to sell, it must be to an Australian. "Malaysians can be so fearful that we're paying too much for our own properties so they go overseas and pay a lot of money for properties whose returns are 2% or 3% net. "To be fair, a lot of people have made their money investing overseas. But the common belief that you can save on rental when your children study abroad by buying a foreign home is difficult unless you have currency gains and your returns are really good. "You can do the same thing here for less risk." On her pick for the best locations to invest in, Lai says prime properties are ever reliable. "Good prime property will always have ready buyers, and they are the first to bounce back." |
| Caterpillar sees China stimulus helping in 2013 Posted: 07 Sep 2012 08:17 PM PDT VLADIVOSTOK, Russia: Caterpillar , the world's largest maker of construction equipment, expects a $157 billion Chinese infrastructure spending drive to feed through to its sales next year, boosting its operations both locally and in North America. China has given the go-ahead to 60 infrastructure projects as it seeks to export weakness resulting from Europe's debt crisis and a slow U.S. recovery that have dragged its economic growth to a three-year low. President Hu Jintao pitched the stimulus plan in a keynote speech on Saturday to business leaders attending an Asia-Pacific summit, drawing an enthusiastic response from Caterpillar's top regional executive. "It's very good news," Richard Lavin, who oversees Caterpillar's China business, told Reuters during the Asia-Pacific Economic Cooperation (APEC) summit in Russia's eastern port of Vladivostok. "To have President Hu ... talking about infrastructure and the role it plays in ongoing stable economic development ... I thought that was really exciting." Highlighting increasing downward risks to global growth, Hu said in his speech that China would "leverage the role of infrastructure in boosting domestic demand, creating jobs and improving people's livelihood". Hu reeled off a list of areas where China needed to upgrade its infrastructure - in agriculture, energy, water conservation and information technology. He also called for a buildout of transport networks, listing railways, highways, waterways, airports and pipelines. Lavin said he expected details of the infrastructure spending plan to become clearer in the next few days or weeks, but Hu's comments suggested "it's going to be very broad in its application". "He talked about roads, bridges, airports, sewage systems, energy - all of these are areas that we play in, it's the core of our business," said Lavin, who is Caterpillar's group president and chairman and is based in Hong Kong. "I think we can expect a fairly broad and significant impact across our business." CHINA OVERCAPACITY Caterpillar, based in Peoria, Ill., posted record earnings in the second quarter, and forecasts 2012 revenues of $68-$70 billion this year and earnings per share of $9.60 - which would also be records. The company has, however, suffered a slide in China as the far larger stimulus package - put into effect in response to the global financial crisis of 2008 - created a raft of bad debts that weighed on the construction sector. Chinese economic growth slowed to 7.6 percent in the second quarter of the year and, in his speech, Hu cautioned that growth was facing "notable downward pressure". Chinese sales as a share of Caterpillar's overall business slipped to 3-3.5 percent last year from 6 percent in 2010, and should roughly hold pace with overall sales this year, Lavin said. He predicted a positive impact from the stimulus in 2013. The company, which has 18 plants in China and nine under construction, has suffered from overcapacity and has started temporarily exporting machinery made there to the Middle East and Africa, but expects its bet on the long-term China growth story to work out. "I would fully expect that the heavy focus on earth moving-type work - roads, airports, bridges - that it'll have a very positive effect on our China manufacturing," said Lavin. "We don't serve China 100 percent from China - we import machines for construction, also for mining, from outside of China, principally from North America. We expect to see a boost from North America, as well as in China." - Reuters |
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