Dijaya eyes land in Penang, Johor to replenish landbank

KUALA LUMPUR: Dijaya Corporation Bhd, known for its flagship Tropicana Golf and Country Resort development, is eyeing more land parcels as it seeks to grow its current landbank of 460 acres (184 hectares), its managing director Datuk Tong Kien Onn said yesterday.

The group was keen to purchase land in Penang and Johor, and has always been on the lookout for land, he told reporters after its AGM yesterday.

“We are looking at all kinds of sizes. Smaller parcels from 10 acres to 20 acres, bigger parcels over 100 acres are also possible,” he said.

However, he noted that sourcing for land in good locations will be difficult as prices are currently high.

Nevertheless, building the group’s landbank will be its strategy going forward, Tong added.

Tong said Dijaya’s current net debt to equity ratio of 0.25 times would enable it to make the bank borrowing necessary to supplement funding for the acquisition of new land. As at March 31, 2010, Dijaya had net cash of RM70.25 million, comprising RM285.48 million in cash and bank borrowings of RM215.23 million.

Dijaya was also exploring opportunities in the Iskandar Development Region in Johor, as it could tap into the spillover effect from the newly opened integrated resorts and casinos Marina Bay Sands and Resorts World Sentosa in Singapore.

“We were told that each casino employs 20,000 to 30,000 staff. If Malaysia’s connection to Singapore were to improve, then it is more economical and sensible to house them in Johor,” he said.

He added that the group was exploring the viability of residential developments with commercial elements.

“At the end of the day, it’s about acquiring land (in Johor),” he said.

Meanwhile, he said the group was poised to launch three more projects this year in Tropicana, Sungai Long and Balakong.

Tropicana Avenue, a RM210 million development, is set to launch in August or September. Spread over five acres, it will feature retail outlets on the first two levels of the project, with SoHo units above. It is targeted for completion in the third quarter of 2013.

Dijaya also aims to launch its 20-acre residential development in Sungai Long in the fourth quarter this year. The project has a gross development value (GDV) of RM137 million and is slated for completion in late 2012.

Its mixed development in Balakong will comprise six phases, largely containing residential units with a small commercial portion, and will cost RM450 million. Its first phase, with a GDV of RM56 million, is slated for launch in the fourth quarter and is targeted for completion in the fourth quarter of 2013.

Meanwhile, its RM540 million Tropicana Grande luxury highrise, which was launched in the first quarter, saw about 45% of its units taken up, said Tong. Its Pool Villas are also seeing good response, with a 31% take-up rate within a month of its soft launch. With a GDV of RM208 million, the development comprises 54 units.

Going forward, Tong said Dijaya aims to maintain its financial performance.

The company posted a net profit of RM49.71 million for the financial year ended December 2009, or 18.5 sen per share, up from RM34.44 million in FY08.

However, he noted that one of the factors that could affect its performance next year is the timing of construction which can affect its revenue recognition with the adoption of IFRIC 15 on Agreements for the Construction of Real Estate on July 1.

IFRIC is the International Financial Reporting Interpretations Committee.

Under the new standard, revenue from progress billings will only be recognised upon completion of the project, as opposed to progressively.

“I feel that it is more suited for countries that adopt build-then-sell models. It will make it harder for us to court investment, as our accounts will not be reflective of our performance.

Cash flow-wise, we will be okay, but our revenue may not match,” he said.

To deal with the adoption of IFRIC 15, Tong said property developers are expected to divide their projects into smaller phases, to ensure that revenue ecognition is not so “lumpy”.

He also hoped the Malaysian Accounting Standards Board (MASB) will review its decision to adopt the new standard.

Dijaya’s shares traded unchanged at RM1.07 yesterday. The stock is trading well below its latest net tangible assets per share of RM1.92.