PETALING JAYA (Sept 3): The master developer of i-City in Shah Alam, I-Bhd, expects profit contribution from its leisure business to more than double in the second half of the financial year ending Dec 31 (FY12), compared with the first half (IH), according to group executive chairman Tan Sri Lim Kim Hong.
Lim said I-Bhd will be able to achieve those targets because the year-end school holiday season is usually the peak revenue months for its leisure business. Its property development segment, meanwhile, will recognise about 20% of its total construction from the RM225 million i-Residence.
“The improvement will be driven by two segments — leisure and property development. We expect to more than double the first half’s leisure performance because the year-end school holidays are usually the peak revenue months. Secondly, we have Waterworld, the new attraction.
“As for the property development side, growth will come from both the completion of the foundation works (equivalent to about 20% of the total construction) as well as more sales. For the first half, we only captured the revenue for the start of the foundation works as well as the revenue from i-Residence’s West wing.
“We have just launched the East wing and expect the same sales response. So we would also expect the contribution from the property development segment in 2H to be more than double that of 1H,” said Lim.
For 1H, I-Bhd recorded a loss of RM3.1 million at its property development segment, on the back of its maiden recognised revenue of RM1.1 million. Its leisure business continued to be the sole earnings generator with operating profit of RM7.6 million, a jump of 239% from 1HFY11.
Lim also said the leisure business is expected to generate at least RM30 million in revenue this year, on the basis of I-Bhd getting RM1 in turnover for every RM1 of investment in the initial start-up period.
One thing that stood out from I-Bhd’s 1H financial results was the lower revenue from its property investment segment compared with a year ago. This is because some tenancies at its MSC Cybercentre were not renewed.
The group’s property investment division recorded an operating loss of RM1.82 million in 1H, higher than the operating loss of RM949,000 in the same period last year. Revenue from the segment decreased slightly to RM4.07 million from RM4.65 million in the same period last year.
Lim said: “What was reflected in the second quarter results was that several MSC tenants that started with i-City four years ago did not renew [their tenancies].
This was expected because their original head office location had yet to be certified as an MSC Cybercentre four years ago and they opened branch offices at i-City to achieve their MSC status.
“Now that their HQ locations are certified as MSC zones, they do not require the branch locations anymore. In fact, we expect to see higher revenue in the future from property investment as renewed tenancies are at higher rates. Certainly our yield will improve. We are also constantly getting new enquiries and are signing up new tenants consistently.”
I-Bhd said its property investment business will continue to chalk up higher rental rates and better yield as the demand for MSC Cybercentre office spaces is growing as there are more new companies seeking for MSC status.
Lim said despite several new MSC Cybercentre offices being built in Kuala Lumpur, i-City remains the only one in Shah Alam or Klang. According to its website, i-City is an ICT-based urban development on a 29.09ha freehold site along the Federal Highway in Section 7, Shah Alam.
It is also an MSC Malaysia Cybercentre where ICT companies with MSC status can enjoy the various incentives offered under the MSC Malaysia Bill of Guarantee.
I-City also boasts tourist attractions such as the City of Digital Lights, [email protected] and various theme park rides promoted by Tourism Malaysia and Tourism Selangor.
This article appeared in The Edge Financial Daily on Sept 3, 2012.