UM Land grows Iskandar real estate cheaply

KUALA LUMPUR (Nov 11): United Malayan Land Bhd (UM Land) has proposed to acquire 332.68 acres (133ha) in Iskandar Malaysia, Johor, through the purchase of Tentu Teguh Sdn Bhd. This will expand its landbank there at the low price of just over RM4 per sq ft (psf).

The property development company announced to Bursa Malaysia on Thursday that it had entered into a conditional share sale agreement to acquire Tentu Teguh for RM10.98 million cash. Upon completion, Tentu Teguh will become a wholly-owned subsidiary of UM Land.

If the proposal is approved, UM Land will subsequently receive 332.68 acres from Tentu Teguh's February 2011 purchase from SAP Holdings Bhd.

The 332.68 acres comprise three parcels of freehold land in Felda Cahaya Baru in Johor Bahru. Tentu Teguh bought the land from SAP for RM45 million and has so far paid RM2.55 million.

UM Land will make the remaining payment of RM42.45 million for the land to SAP and Cahaya Baru Development Bhd and will absorb Tentu Teguh's liabilities up to a maximum of RM9.3 million.

Based on the purchase price, the assumption of Tentu Teguh's liabilities plus the remaining payments for the land, The Edge Financial Daily estimates the total effective cost to UM Land for the 332.68 acres will be RM62.73 million, or RM4.33 psf.

An analyst deems the price attractive given its strategic location within Iskandar Malaysia and its proximity to the major ports and petroleum hubs in the southern tip of the state.

"[The land] is within close proximity of UM Land's flagship township Bandar Seri Alam and surrounding developments such as Taman Scientex, Bandar Bistari Perdana, Kota Masai and Lakehill Resort City," said the company.

The company said fast expanding townships in the vicinity will provide a good base of potential buyers for its proposed developments on the land.

Pasir Gudang Port and the Tanjung Langsat industrial area are also close to the land. Tanjung Langsat is slated to be developed into a port for petrochemicals and non-edible chemicals and storage facilities. Ten multinationals have already committed to invest RM4 billion in the estate over the next few years.

Benalec Holdings Bhd announced on Thursday that it had won approval from the Johor government to reclaim 1,760 acres on the coast of Pengerang and 3,485 acres on the Tanjung Piai coast in Johor, close to UM Land's tract (see story above).

Benalec plans to develop the reclaimed land into a hub for petroleum and petrochemicals as well as maritime industrial parks.

Its ambitious plans, the large presence of oil and gas projects on the coast and the growing recognition of Iskandar Malaysia augur well for UM Land's large landbank in the area.

A market observer notes that UM Land's cost for the latest piece of land will likely be much lower than Benalec's reclamation costs for the new project.

In a separate filing on Thursday, UM Land announced that it had received approval of its earlier proposal to Bursa Malaysia in August to acquire a 8.89-acre parcel of land in Plentong, Johor, through its indirect wholly-owned subsidiary, PMS Services Sdn Bhd.

The cash purchase was at RM19.37 million, or RM50 psf, from TCB Realty Sdn Bhd.

Despite a relatively small market capitalisation of RM426 million, UM Land has a large landbank of close to 2,000 acres located in Iskandar Malaysia and Selangor, as well as several niche projects in downtown Kuala Lumpur.

Its two main townships in Iskandar are Seri Alam and Taman Seri Austin, while its Bangi project is Bandar Seri Putra.

UM Land is one of the largest landowners there, with a landbank of around 1,790 acres after the latest purchase.

The company's major shareholders include CapitaLand Ltd.

UM Land's share price s closed at RM1.41 on Thursday, trading at less than half its net assets per share of RM2.95 as at June 30, after adjusting for a one-for-four bonus issue in August.