Menara YNH to be launched this year after delay

KUALA LUMPUR: YNH Property Bhd plans to launch properties with a gross development value (GDV) of RM5 million this year, including the delayed Menara YNH project in Jalan Sultan Ismail. Daniel Chan, head of corporate services, said YNH is currently in talks with various parties on a potential joint venture to develop the project.

Menara YNH, with a current estimated GDV of RM2.1 billion, is seen as a major catalyst to YNH's bottom line growth. The project has been delayed several times since 2006, as deals with two perspective buyers terminated in the past. But market observers said with the property sector heating up again the project may see a chance of revival.

YNH had originally tied up with Singapore property giant CapitaLand Ltd for the project. The two companies signed an MoU in December 2006 to jointly develop Menara YNH on a 60:40 basis. Construction was originally slated to begin in mid-2007 with completion by end-2011. But in June 2007, the MoU was terminated.

Then in January 2008, YNH announced that it would sell half of the Menara YNH project to Kuwait Finance House (KFH) for RM920 million. The sale involved an area of 750,000 sq ft at a price of RM1,230 psf, which at that time set a new record as it was about 10% higher than the record price commanded by the 36-storey Glomac Tower nearby.

KFH was supposed to take up half of the building with the rest to be sold to other buyers. YNH received RM1.84 billion in total proceeds from selling the entire project. But the KFH sale fell through due to the global financial crisis. In December 2009, KFH informed YNH that it would not proceed with the formalisation of the sale and purchase agreement.

Chan said Menara YNH would be now launched in different components — starting with the retail portion, followed by the serviced apartments and offices. Note that the price of the land has appreciated significantly to more than RM2,000 per sq ft, compared with the acquisition price of about RM400psf paid by YNH. In addition, its current estimated GDV of RM2.1 billion is also about 14% higher than the deal previously entered into with KFH.

Chan said YNH is keeping its options open for now on whether it would sell the tower en bloc or on a strata title basis, depending on demand. According to a note accompanying the company's 1Q results, YNH said it had intended to keep 50% of Menara YNH as an investment property and it would be used as the company's future corporate headquarters. But Chan said, "If we get a good price, we may sell everything."

Menara YNH forms almost half of YNH's estimated RM5 billion worth of property launches this year. Another of the company's major launches is the RM1.2 billion "Kiara 163" mixed project, located beside Plaza Mont'Kiara.

So far this year, YNH has launched RM650 million worth of serviced apartments at its "Fraser Residence" project in Jalan Ampang and Jalan Sultan Ismail, and about RM300 million worth of properties at its Seri Manjung township project in Manjung, Perak.

Analysts said YNH's net profit could grow more than 50% annually in FY11/12 ending December, in line with the quantum of property launches and the recognition of sales in the company's books. In FY10, YNH's net profit rose 10% to RM56.96 million while revenue was up 2% to RM252.13 million. YNH on Monday reported 1QFY11 net profit of RM15.8 million and revenue of RM55.3 million.

Estimates by analysts polled by Bloomberg indicate that YNH's FY11 net profit could surge 34% to RM76.58 million while revenue may rise 39% to RM351 million. Net profit and revenue in FY12 are expected to reach RM97.83 million and RM506 million. In a recent report, Hong Leong Investment Bank said it expected YNH to register a strong set of results in FY11/12 with earnings growth at between 37% and 51% in the two-year period. The projection takes into account YNH's RM1 billion worth of unbilled sales from Kiara 163, Fraser Residence and the Seri Manjung township, besides the remaining GDV of RM1.1 billion for Kiara 163 and Fraser Residence.

"Note that our FY11 to FY13 earnings estimates do not factor in contributions from Menara YNH, or future projects from the Duta Nusantara area. However, management still hopes to launch the RM300 million retail portion of Menara YNH in the second half of 2011," Hong Leong said.

Shares of YNH closed unchanged at RM1.96 on Monday, May 23.