KLK sees property contributing 15% of net profit in five years

KUALA LUMPUR: Plantation firm Kuala Lumpur Kepong Bhd (KLK) will leverage on UEM Sunrise Bhd’s experience to make its maiden foray into property development in Iskandar Malaysia, Johor, a move that it hopes will boost contribution from its property segment to 15% of the group’s net profit in five years.

“Currently, the property business contributes about 5% to the group’s net profit, but with time, this percentage will increase quite dramatically to hopefully 15%,” KLK group CEO and executive director Tan Sri Lee Oi Hian (pic) told reporters after the signing of a joint venture agreement between KLK and UEM Sunrise last Friday.

The plantation segment, which involves the cultivation and processing of palm and rubber products, contributed 46.8% to the KLK group’s revenue last year.

Earlier, KLK announced that it will jointly develop land with UEM Sunrise in Gerbang Nusajaya, and Fraser Metropolis in Kulai, worth RM1.74 billion and with a combined gross development value (GDV) of RM20 billion.

Under the partnership, KLK and UEM Sunrise will form two joint venture companies — Scope Energy Sdn Bhd (which will be 60:40 owned by KLK and UEM Sunrise respectively, and Aura Muhibah Sdn Bhd (which will be 40:60 owned by KLK and UEM Sunrise, respectively) — to undertake the developments.

Aura Muhibbah will develop the land in Fraser Metropolis after buying the Kulai site from KLK for RM871.2 million. while Scope Energy will develop the Gerbang Nusajaya plot after acquiring it from UEM Sunrise for the same price. The 500 acre (202ha) project in Gerbang Nusajaya will feature residential and commercial properties with a GDV of RM5 billion to be developed over eight years.

Fraser Metropolis, which spans 2,500 acres, will comprise residential, industrial and commercial properties with a GDV of RM15 billion to be developed over 15 years.

“Gerbang Nusajaya  will also have a multi-purpose race track and a 519 acre integrated technology park, while 40% of Fraser Metropolis will be allocated for industrial parks,” said UEM Sunrise executive director Datuk Izzaddin Idris.

Plans for the development of both projects are still in the early stages, with developments expected to be launched in the middle of next year.

“KLK is very happy to have this partnership with UEM Sunrise because the latter has [a] rich experience ... in the development of townships,” said Lee.

“I think that with a good partner like UEM Sunrise, we would be able to combine our experience ... to develop ... thriving townships,” he added.

UEM Sunrise, on the other hand, sees the partnership as an opportunity to increase its landbank.

“With this [joint venture], UEM Sunrise is also able to [increase] its land bank supply with more prime assets to accelerate the company’s future growth trajectory.

“Our landbank in Gerbang Nusajaya currently stands at 4,500 acres. After [the] deal with KLK, the remaining landbank is 3,200 acres,” said Izzaddin, adding that buyers can look forward to a unique concept in affordable housing in the new developments.


This article first appeared in The Edge Financial Daily, on February 10, 2014.