KUALA LUMPUR (May 31): Plantation and property conglomerate Hap Seng Consolidated Bhd is eyeing the launch of property developments with a gross development value (GDV) of approximately RM1.3 billion this year.
The group believes demand will remain strong particularly for affordable housing, in the peninsular and East Malaysia, Hap Seng group managing director (MD) Datuk Edward Lee Ming Foo said.
Of a total GDV value of RM8.3 billion to RM8.4 billion for all its property developments, some RM3.2 billion come from projects in Sabah, Hap Seng executive director Lee Wee Yong noted. “These will be launched over time depending on when we want to kick-start them and get [the necessary] approvals,” Wee Yong said.
However, the group expects the current overhang in Malaysia’s property market to last for two more years, Edward told The Edge Financial Daily. Among the projects it will be launching this year are a 44-storey service apartment in Jalan Kia Peng, with a GDV of RM580 million, as well as various developments in Sabah, Edward said.
Hap Seng is also targeting to launch its business park — the commercial segment of its Akasa project in Cheras this year, as well as its D’Alphina township’s last phase comprising affordable housing, said Hap Seng executive director Cheah Yee Leng.
Meanwhile, the group expects crude palm oil (CPO) price to trade between RM2,400 and RM2,700 per tonne this year. Barring any escalation in the trade war between China and the US, which would be supportive of CPO prices, prices are seen to be “quite stable”, said Edward.
The production of fresh fruit bunch should return to a “normal” level of around 160,000 tonnes this year compared with about 159,000 tonnes last year, as the El Niño weather phenomenon’s effects wear off, said Wee Yong. “We do not see any adverse weather effects in future, unless there is exceptionally wet weather from the La Niña phenomenon.”
Following Hap Seng’s disposal of a 100% stake in HSC Sydney Holding Ltd for RM771.16 million and a 20% share in Hap Seng Credit Sdn Bhd for RM906 million to Lei Shing Hong Capital Ltd, the group’s gearing will be reduced to 0.32 times, Wee Yong said.
The group’s independent and non-executive chairman Datuk Jorgen Bornhoft said the deal was found to be “extremely attractive” and that shareholders had given the group a “clear yes” for the disposal.
“There will be no problem filling in the [earnings] gap left by the disposals,” Bornhoft told reporters after the group’s annual and extraordinary general meetings yesterday. He added that the entry of a new shareholder into Hap Seng Credit would add value to the group.
On its acquisition of Mercedes-Benz Malaysia Sdn Bhd’s commercial vehicle business, Edward said Hap Seng is expecting any financial contribution from the business to be recognised only in the medium to long term. Hap Seng, on April 25 this year, entered into an agreement to become a wholesale distributor of Mercedes-Benz and Fuso commercial vehicles in Malaysia.
The management declined to disclose the price it is paying to acquire the distributorship. “If you’re wondering whether we are paying a massive amount, then the answer is ‘no’,” she said.
On the abolishment of the goods and services tax, Wee Yong said its impact on Hap Seng is unlikely to be material. “It will also depend on the sales and services tax rate that the government will impose. Administratively, it would be more straightforward, but we are still in a flux at this stage,” he said.
Hap Seng shares closed down 19 sen or 1.94% at RM9.59 yesterday, with a market capitalisation of RM23.88 billion.
This article first appeared in The Edge Financial Daily, on May 31, 2018.
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