Bukit Jalil land to boost Malton

PETALING JAYA (July 5): The truce between Malton Bhd and Ho Hup Construction Bhd has made the former a clear winner, for having secured a large prime tract in the Klang Valley without the hassle of fi nancing a costly land purchase.

Still, what is by far the largest land deal going into Datuk Desmond Lim’s listed vehicle, after he took Pavilion REIT public, has yet to excite Malton’s share price.

The developer, 37.9%-owned by Lim, closed unchanged at 56 sen on Wednesday with a market capitalisation of just about RM232 million, which had even factored in the company’s net cash of RM60.2 million as at March 31, 2012.

The stock is also sharply below its net asset value of RM1.36 per share. While some may point out Malton’s large number of outstanding warrants and redeemable convertible secured loan stocks (RCSLS), the concern of dilution is not immediate because their exercise price of RM1 is higher than the price of the mother share.

On Tuesday, Malton reached a settlement with Ho Hup on the joint development agreement (JDA) over a 60-acre (24ha) site in Bukit Jalil, with minor amendments made to the original deal.

After a longdrawn legal battle, the handshake with Ho Hup has fi nally granted Malton access to a potentially large development in Klang Valley. Sealing the deal with Ho Hup for the land could expand Malton’s project portfolio.

Is now viewed as a niche developer in the Klang Valley, given that the bulk of its remaining landbank is either outside the prime area or in other states, said property market observers.

The entire Bukit Jalil land is said to have the potential to generate a total gross development value (GDV) of RM4 billion over 8 to10 years. While Ho Hup will develop 4.05ha on its own, Malton gets to develop 20.23ha of the land in exchange, sharing 18% of the GDV with Ho Hup, subject to a minimum amount of RM220 million.

Although the percentage to be shared with Ho Hup has increased one percentage point from 17% as per the original JDA, it is still deemed a good deal for Malton because it need not finance the purchase of the land up front, which could cost few hundred million ringgit, said property industry players.

In fact, the deal was deemed such a good one for Malton that the current board of Ho Hup had been trying to revoke the deal, only to finally give in a few days ago, given the latter’s tight financial position.

Property analysts pointed out that Malton’s lacklustre share price performance is a sharp contrast to the excitement generated by Pavilion REIT, in which Lim owns 37.58% equity interest with his wife.

Pavilion REIT at its current price of RM1.21 has gained 38% against its IPO price of 88 sen. While not covering the stock, some analysts said Malton’s lack of investor relations efforts may have contributed to the stock’s constant poor showing.

Nonetheless, Malton has been profitable, with a net profit of RM33.06 million for the nine months ended March 31, 2012. Its net profit of RM72.69 million in financial year 2011 (FY11) was a huge jump from FY10’s RM22.1 million.

Long-time Malton investors would be expecting the development of the Bukit Jalil land to generate handsome earnings, thereby bringing some positive price movement for the stock.

This article appeared in The Edge Financial Daily July 5, 2012.