Dijaya project may have interested en bloc buyer

PETALING JAYA: Certain parties have indicated interest in acquiring a project en bloc from Dijaya Corp Bhd, its managing director Datuk Tong Kien Onn told The Edge Financial Daily.

"We do not have any specifics, but interest has been expressed in buying an entire project from us," said Tong after the company EGM on Monday, Oct 3.

An analyst narrowed down the potential targets to Tropicana City Mall, Tropicana Office Tower and the proposed W Hotel.

Tropicana City Mall and Tropicana Office Tower, both in Petaling Jaya, boast rising occupancy rates and customer traffic, while the W Hotel project in Jalan Ampang, Kuala Lumpur, which is slated for completion in 2016, comes with international branding and recognition in a location close to the Petronas Twin Towers.

Tropicana City Mall has a net lettable area of 450,000 sq ft while the adjoining 12-storey office tower has around 105,000 sq ft of net lettable space.

Dijaya is partnering world leading hotel and leisure company Starwood Hotels & Resorts Worldwide Inc to develop the W Hotel, which will also include residences for sale.

The project sits on a 55,929 sq ft piece of land and was acquired by Dijaya in late 2009 for RM123 million or RM2,200 per sq ft (psf).

Dijaya has been expanding rapidly, recently acquiring roughly RM830 million for its landbank with 200ha in Subang and Kajang, Selangor, Kampar, Perak, and Plentong, Johor.

"Iskandar Malaysia will definitely come around," said Tong, who has high hopes for the southern development corridor in Malaysia in which two of Dijaya's recent land acquisitions are situated — Plentong.

"Iskandar is about three to five years behind Penang and we know how hot property is in Penang at the moment.

"The property market [in Iskandar] has picked up of late compared to about four years and over the past one year prices have been rising," said Tong.

"Prices used to be around RM200 to RM300 psf but now they are around RM400 to RM500 psf," he added.

Tong said a venture by UEM Land Holdings in Puteri Harbour managed to fetch between RM550 psf for the lowest floor and RM750 psf for the highest floor, for an average of about RM650 psf.

The high prices are indicative of things to come, said Tong, who is optimistic about the growing demand in Iskandar.

According to Tong, the Puteri Harbour project managed to sell 66 of the 240 units, which he says "is not a bad start" given the relatively high pricing.

on Monday's EGM, which was held in Dijaya's flagship Tropicana Golf and Country Resort, saw all resolutions passed.

The resolutions related to the acquisition of land in Subang and Kampar, the private placement of new ordinary shares of up to 30% of its paid-up capital, and an amendment to the employees share option scheme (Esos).

"Shareholders asked us many questions about the acquisitions and the private placement, but the sentiment was positive," explained Tong.

"Changes were made to the Esos to accommodate four new executive directors we have appointed in tandem with our plans for rapid expansion", said Tong, citing the amendment which will allow the directors to be allotted 946,645 shares each, immediately instead of waiting a year.

Dijaya was in a relatively good cash position, Tong told The Edge Financial Daily, adding: "We currently have net cash."

"When our commitments come due, our gearing will be going up," he said, linking it to increased borrowings to fund its recent land acquisitions.

"Our projects are normally 60% to 70% funded by debt. Bank financing is not an issue for us at this time and we have a very reasonable cost of financing of about 5% on average. The private placement will supplement the remaining 30% to 40% in capital funding for our recent acquisitions," he said.

Tong also said credit availability is not a problem in Malaysia at present and that he expected interest rates to stay low as Bank Negara Malaysia tries to keep the economy growing in the midst of a slowing global environment.

"Dijaya has good earnings visibility with unbilled sales of RM430 million, which we hope to maintain and improve," he said.

When asked about the falling housing affordability, Tong said: "Property prices have been driven by the increasing cost of materials and rising labour costs.

"The affordability problem isn't due to rising property prices. Compared to other countries in the region, property prices in Malaysia have been rising moderately. The problem is that wages in Malaysia have not been rising in line with the prices resulting in the falling affordability."

Dijaya's net profit for 1H11 of RM41.14 million was five times the RM7.61 million booked a year ago, driven by improved margins recognised for projects this year as well as a RM20.51 million net gain on fair value adjustment arising from marketable securities.

Dijaya closed down three sen to RM1.29 on the back of 298,800 shares traded.

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