UM Land builds on education in Iskandar

KUALA LUMPUR (Dec 13): United Malayan Land (UM Land) continues to create more value for its large landbank in Iskandar Malaysia, Johor.

After last month's purchase of a large tract of land at a low price, UM Land is embarking on a joint venture with Singapore-based Raffles Campus Pte Ltd to build an international school in its Seri Alam township.

As part of the agreement, UM Land will sell 8ha of land to Raffles Campus (Seri Alam) Sdn Bhd (RCSA) — the joint venture company which is 51% owned by UM Land and 49% by RCSA.

The land is being sold for RM10.83 million, or around RM12.61 psf.

Interestingly, while market observers note that the sale price appears relatively low as it is for a joint venture project, UM Land still stands to make a large profit from it.

According to the company's announcement, as at Dec 31, 2010, the net book value of the land was just RM2.4 million, or RM2.80 psf which means the sale price is 4.5 times higher.

This underscores the undervaluation of its large landbank and its stock is trading at half its understated book value. UM Land shares gained seven sen to close at RM1.49 on Monday, half of its book value of RM3 as at Sept 30, 2011.

The land sale follows an earlier announcement to Bursa Malaysia in April on the proposed tie-up to establish the international school.

The school will be named Excelsior International School and is expected to be completed in 2013.

Besides making a profit, UM Land will also be able to increase the value of the Bandar Seri Alam land as it adds another educational institution to its list of six.

The "City of Knowledge", which Bandar Seri Alam has been called, has four universities (Masterskill University College of Health Sciences, Universiti Kuala Lumpur, Universiti Teknologi Mara, HELP University College), two colleges (Mara Junior Science College and Malaysia Art School) and Raffles International School.

Furthermore, there are schools including a Japanese school, Nam Heng Primary School and 16 primary, secondary and religious schools.

The positioning of Seri Alam as a major education hub will significantly increase its appeal, said an analyst, given the various competing developments in Iskandar Malaysia. It will also benefit UM Land's recently acquired land near Seri Alam at a low price.

On Nov 22, 2011, the company proposed to acquire 135ha of land in the vicinity at a low price of just over RM4 psf through the acquisition of Tentu Teguh Sdn Bhd.

The acquisition will increase UM Land's landbank in Iskandar Malaysia to almost 810ha, making it one of the largest landowners there, apart from UEM Land Holdings Bhd, which has over 3,600ha.

UM Land, with its large landbank in Iskandar Malaysia, Bangi, Selangor and the KLCC area, has a relatively small market capitalisation of RM450.03 million, while  UEM Land's land bank is five times larger but its market capitalisation of RM9.68 billion is 21 times higher, the analyst noted.

UM Land's other main township in Iskandar Malaysia is Taman Seri Austin, while its Bangi project, Bandar Seri Putra, also draws more interest as developers like S P Setia Bhd are moving to more outlying areas like Semenyih and Beranang.

Besides attracting Singaporeans, the Iskandar Malaysia region could also be an attractive investment alternative for foreigners discouraged by the recent measures by the Singapore government to cool the property market. Last week, the Singapore government announced a measure which requires foreigners to pay an additional stamp duty of 10% of the property value.

UM Land's major shareholders include CapitaLand Ltd and Tradewinds Corp Bhd.