Dijaya says can put RM830m of new land to work

KUALA LUMPUR: Dijaya Corp Bhd is confident it can put the RM830 million worth of land it has acquired the past three months to work despite the current global economic headwinds. The property developer has purchased over 200ha of land in Subang and Kajang, Selangor, and Johor Bahru.

Managing director Datuk Tong Kien Onn said the company, known for its flagship Tropicana Golf and Country Resort in Petaling Jaya, possesses the resources to develop the land and launch the various projects on schedule even though the parcels were acquired in such a short period of time.

“As long as the location is right, even with the current economic headwinds, I think we should be able to sell them well,” he told The Edge Financial Daily.

It is worth noting that total gross development value (GDV) planned for the three parcels of land amounts to RM7.3 billion.

On Monday, Dijaya announced it had acquired 80ha of freehold development land in Kajang from Taiyo Resort (KL) Bhd for RM228 million or RM26.36 per sq ft. The land will be turned into a mixed development with an expected GDV of RM2 billion.

This was Dijaya’s third major acquisition this year. In July, the company proposed to acquire 36ha of land in Subang for RM385.5 million from Chunghwa Picture Tubes (M) Sdn Bhd and just last month it announced a deal to purchase 92ha in Plentong, Johor Bahru, for RM220 million. The Subang land will have a GDV of RM2.5 billion and Plentong RM2.8 billion.

“We expect to start launching [the three projects] next year, with the Kajang Hill development slated in the later part of 2012. We have already taken in quite a number of [staff] to handle the projects,” said Tong.

In addition, Dijaya recently proposed a private placement exercise of 30% of the company’s issued capital to fund its expansion and to allow higher institutional ownership of the company.

Tong said Dijaya is expected to raise some RM200 million from the placement exercise that could help partially finance its recent land acquisitions.

New borrowings will be undertaken to finance the land acquisitions as well, said Dijaya in its announcement to Bursa on the funding mode for the land. As at June 30, Dijaya’s net borrowings amounted to RM84.4 million against shareholders funds of RM937.9 million.

Dijaya saw its net profit for 1H11 rise substantially to RM38.89 million from RM3.1 million for the same period in the previous year, helped by better margins recognised for projects this year as well as a RM20.51 million net gain on fair value adjustment arising from marketable securities.

Revenue gained 0.2% to RM128.34 million in 1H11. The improved project margins were from Tropicana Grande, Casa Tropicana Block E, Pool Villas, Grand Villas and Link Villas, the company said in notes accompanying its results. Earnings for 1H11 also benefited from the recognition of  RM4 million in compensation damages received from a contractor.

Despite the global uncertainties, the company said it believes it can achieve an improved performance for FY11 ending Dec 31 with the help of sustainable domestic demand and positive government initiatives.

According to the notes accompanying its financial statement, Dijaya had unbilled sales of RM450 million as at June 30.

“In addition, the group’s development projects, being located in prime and strategic locations, are expected to continue to receive positive demand and provide a sustainable base for the group’s financial performance,” said the company.

Dijaya’s current share price of around RM1.50 is at a 28% discount to its net asset value of RM2.06 as at June 30, or a price-to-book value of 0.72 times.