City&Country: The Edge Top Property Developers Awards 2009-- Of property buyers and stock investors

Bashed by impact of the global financial crisis, property stocks were bad news last year. There was no running away from the close link between the economy and the property market. Neither has Malaysia decoupled from the rest of the world as some quarters had earlier touted.

Several positive policy changes have been made to boost the local property development and construction sectors since the onslaught of the global credit woes, including those in the 2009 Budget announced last August and two stimulus packages that totalled more than RM273 billion that followed.

All eyes are on the 2010 Budget, which will be unveiled on Oct 23, on how the government will drive the economy to full recovery.

Known to generate greater upside-downside swings compared to the broader stock market, property stocks have since crawled back onto the radar screens of investors from 2Q this year. This reflects the improved sentiment about the economy, which in turn helped boost property sales.

How did the public-listed winners of The Edge Top Property Awards 2009 — a ranking based on quantitative and qualitative attributes seen from the consumer’s perspective — perform on the local bourse over the 21-month period ended Sept 15, 2009?

As in previous years, it is clear there is no guarantee that the needs and wants of the property-buying community will match that of property stock investors.

It must be noted that some of the listed companies would have undergone corporate exercises during the review period that would have impacted their share prices.

According to the data from Interactive Data Systems Sdn Bhd, Plenitude is the only listed developer in the Top 30 this year that showed a positive difference in share price between Jan 1, 2008 and Sept 15 this year.

Plenitude registered a 7.2% jump in share price or a 19-sen improvement during the review period. The stock closed at RM2.86 last Tuesday, with 7,000 shares traded.

Paramount Corp Bhd eased 0.41% from January 2008 to close at RM2.42 on Sept 15 this year; in real terms, it only experienced a mere one sen drop. The counter closed at RM2.46 last Tuesday, with 11,000 shares changing hands.

Taken private
On April 28 this year, IOI Properties was voluntarily delisted. It had requested for suspension on Jan 30 (last traded price: RM2.22; offer price: RM2.598) to pave the way for it to be taken private by parent company IOI Corp Bhd.

IOI Corp launched a voluntary general offer (VGO) for all IOI Properties shares it did not own at RM2.598 apiece via a combination of share swap and cash payment.

The offer price of RM2.598 was at a 17% premium over its last traded price of RM2.22 prior to the privatisation announcement. However, it was at a substantial 34% discount to IOI Properties’ net tangible value of RM3.95 per share. The VGO was made after IOI Properties’ share price tumbled to a seven-year low. (Editor’s note: IOI Properties was automatically considered in this year’s ranking because it is based on published financials for the year ended 2008)

Meanwhile, Bandar Raya Developments Bhd (BDRB), Hunza Properties Bhd and Eastern & Oriental Bhd (E&O) gave up 48.39%, 44.81% and 44.4% in share price respectively during the review period.
BRDB closed at RM1.69 last Tuesday, Hunza Properties at RM1.50 and E&O at RM1.36.

Interestingly, IOI Properties, BDRB and E&O have managed to emerge as the Top 10 developers, coming in at 6th, 7th and 8th respectively.

Of the Top 10, seven are listed companies (including IOI Properties). However, outshining them all is Sime Darby Property Bhd, the property arm of Sime Darby Bhd, which made history by being the first non-listed developer to come out on top in the awards. This is the first time Sime Darby Property has submitted an entry to the awards which were opened to non-listed developers last year.

S P Setia Bhd, Sunway City Bhd and IGB Corp Bhd, ranked 2nd, 3rd and 4th in the awards, were also the three best performers percentage wise at the end of the 21-month period although, ironically, share prices dipped during the same period.

S P Setia saw a drop of 14.12% or 72 sen in its share price during that period. The stock once rose to a 52-week high of RM4.24 on June 8, after it inked a cooperation agreement with Hangzhou Ju Shen Construction Engineering Ltd to set up a joint venture to carry out a mixed property development in the province of Zhejiang, China. However, the counter tumbled the most in 15 months to RM3.84 on June 19 this year after reporting a 15% fall in net profit in 2QFY2009 ended April 30. It closed at RM4.01 last Tuesday.

Mah Sing Group Bhd, meanwhile, expects to conclude talks with the country’s largest fund manager Permodalan Nasional Bhd (PNB) to jointly develop some pieces of land. The developer is said to be looking at a long-term relationship with PNB.

(Note: The 30-component FTSE Bursa Malaysia KLCI (FBM KLCI) was launched on July 6 this year to replace the 100-member Kuala Lumpur Composite Index (KLCI) in order to keep Bursa Malaysia relevant in the global market.)

Corporate exercises
Analysts’ recommendations might also have impacted the share prices of these listed developers. E&O, for instance, was the top property pick of CIMB Research on Sept 3. The research house recommended the stock as a “trading buy” at RM2.18 after tagging a 30% discount to its adjusted fully diluted revised net asset value per share (RNAV/share) of RM3.11. E&O’s share price surged 13% to close at RM1.47 on Sept 3.

E&O shareholders had in August this year approved a proposed renounceable rights issue of up to RM246.9 million nominal value 10-year irredeemable convertible secured loan stocks (ICSLS) due 2019, which will position the group on a solid footing to consolidate its earning drivers.

The exercise will involve the issue of one ICSLS of 65 sen each for every two existing E&O shares. The stock closed at RM1.36 with 3.46 million shares done last Tuesday.

IJM Land Bhd, formerly known as RB Land Holdings Bhd, acquired 100% of IJM Properties Sdn Bhd for RM1.222 billion last year. The acquisition was satisfied with RM822 million cash and the issuance of RM400 million nominal value of 10-year 3% RB Land redeemable convertible unsecured loan stocks (RCULS).

To help finance the acquisition, RB Land proposed a renounceable rights issue of 454.549 million new RM1 shares.

It also proposed to issue 227.274 million detachable warrants at an issue price of RM1.25 per rights share on the basis of four rights shares and two warrants for every five existing shares held in RB Land. The exercise price of the warrant is fixed at RM1.35 per share.

IJM Land’s share price surged 10% to RM1.98 on Aug 13, the most since Jan 5 this year after AmResearch raised its target price on the stock to RM3 from RM2.40, as well as several signs of a recovery in the sector. It closed at RM2.31 last Tuesday.

Naza Group, the parent company of Top 30 property developer Naza TTDI Sdn Bhd, meanwhile is undertaking a mandatory general offer (MGO) for construction outfit Kumpulan Jetson Bhd via Superior Pavilion Sdn Bhd (SPSB) and Odyssey Wealth Sdn Bhd (OWSB), which are privately owned by the chief executive and executive chairman of the Naza Group S M Nasarudin S M Nasimuddin as well as the group managing director of Naza TTDI S M Faliq S M Nasimuddin.

The scions of the Naza Group founder — the late Tan Sri S M Nasimuddin S M Amin — are offering a revised price of RM1 for the Jetson shares and 90 sen for the irredeemable convertible loan stocks (ICULs). As at press time, the brothers, however, failed in their conditional takeover bid as the minority shareholders rejected their RM1 per share offer price for the remaining shares in the company. Kumpulan Jetson closed at RM1.80 last Tuesday, with 524,500 shares transacted.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 776, Oct 12-18, 2009.