KUALA LUMPUR (Aug 10): Garment maker turned property developer Yong Tai Bhd is banking on the volume of tourists that will come in from China and Singapore to drive its planned tourism-related property projects in Melaka.
Yong Tai had on Aug 3 penned five separate memoranda of understanding (MoUs) for a host of proposed business and land buys that can provide it with five potential property development projects in Melaka, Klang Valley and Johor, with a combined gross development value (GDV) of RM7 billion, spread over eight years.
One of the developments is a tourism-related mixed development in Kota Laksamana, Melaka.
It also plans to purchase PTS Impression Sdn Bhd — a company holding the rights to produce and stage the ‘Impression Melaka’ theatre performance. Melaka is the first location outside China — where it uses the Li River in Yangshuo as its stage — to perform the show.
A theatre building project based on the natural-stage concept of the Impression series in China to house the “Impression Melaka” performances is expected to be completed by end-2017, said Yong Tai executive director Ng Jet Heong recently.
Together with the group’s proposed sea-fronting tourism-related mixed development in Kota Melaka called ‘Impression City’, Ng believes the two Melaka projects — which may potentially contribute RM6.3 billion worth of GDV — will attract more tourists to the state, particularly those from China and Singapore.
“The reason why we chose to take on the two Impression projects in Melaka is because of the China link. When I was in China and Taiwan, I was surprised that the people [there] know about Melaka, and the Impression series is very well received in China,” said Ng.
“The ticket price for an Impression show in China is steep at between RM300 and RM400. I am going to price it [competitively] and we might see many tourists who will visit Melaka and watch the show,” he added.
Another bonus point is the Kuala Lumpur-Singapore high speed rail (HSR), which he sees will bring in more tourists from across the causeway, given that Melaka lies snugly between the two capital cities.
“It is almost impossible to get a hotel room over the weekend in Melaka. The number of tourists in the state can reach up to 2 million, while the entire local population of the state is only 800,000,” he said, adding that the state’s strong demand for affordable hotels was why Yong Tai is venturing into tourism-related projects.
The other three developments the group hopes to realise are a luxury serviced apartment project in Jalan U-Thant, Kuala Lumpur, a mixed development comprising a tower block of small office versatile office (SoVo) units and a hotel in Puchong, Selangor, and a mixed development comprising retail and SoVo units, hotel and office suites in Johor Baru, Johor.
But investors do not seem too excited by the announcement of its projects, as the stock has slipped about 22% since July 31 to close at 61 sen last Friday.
Still, Yong Tai, which saw a pre-tax loss of RM7.25 million in its financial year ended June 30, 2014 (FY14) on the back of RM63.81 million turnover due to stiff competition in the garment industry, believes it is on track to return to the black after years in the red.
It saw a net profit of RM1.1 million for the nine months ended March 31 (9MFY15), compared with a net loss of RM1.9 million a year ago, thanks to its property development venture.
“For now, the composition of our business is 60% property development, and 40% [garment] manufacturing. Moving forward, hopefully we will see an 80:20 ratio in FY16,” he said.
Ng, who joined Yong Tai late last year, said the group is also looking at reintroducing a dividend policy to attract serious, long-term investors.
“Besides raising capital internally and externally, we are also looking at roping in foreign funds. They are eager to invest in properties that will be able to carry their brand name.”
This article first appeared in the digitaledge Daily on Aug 10, 2015. Subscribe here.