KUALA LUMPUR: Interested buyers of LBS Bina Group Bhd’s 246-acre (99.55ha) Zhuhai International Circuit Ltd (ZIC) take note — the property developer is in no hurry to dispose of its only remaining Chinese asset. It will only consider monetising it after a transformation plan to redesign the plot into a tourist spot — with commercial developments worked in — is approved by the authorities.
“Any plans, including whether we want to sell it or not, will [only be looked at] after the transformation gets the necessary approval,” LBS Bina (fundamental: 1.0; valuation: 1.2) managing director Datuk Seri Lim Hock San told The Edge Financial Daily in an interview.
He also stressed that LBS will only sell the racing track “if the deal is attractive”.
“We are in no rush. There will be more value once we get the approval,” he said, adding that he and his partners in China had just agreed on the concept and design of the transformation plan and that they expect it to be approved in the second quarter of next year.
Lim said LBS’ local partner had proposed the plan after considering the economic prospects that the completion of the Hong Kong-Zhuhai-Macau Bridge will bring to ZIC, which will make Zhuhai accessible to travellers from Hong Kong in 30 minutes.
“There will also be a branded car showroom, hotel, exhibition hall, commercial mall and high-rise residential units,” he added, but declined to disclose the gross development value (GDV) of the project.
Presently, rental of the racing track at ZIC is about 90,000 yuan (RM51,125) per day on weekdays and 120,000 yuan per day during weekends. For the first nine months of 2014, ZIC recorded a net profit of RM44.67 million.
LBS currently has a 60% interest in ZIC, its only remaining asset in China after it completed the disposal of two land parcels in the republic for HK$1.65 billion (RM679.5 million) in 2013 to Hong Kong-listed Zhuhai Holdings Investment Group Ltd, which would be settled with HK$500 million cash and a 16.8% stake in the latter.
The balance HK$850 million will be paid to LBS in tranches over four years, from 2014 to 2017.
The assets that were sold to Zhuhai Holdings comprise a piece of development land in Zhuhai (HK$1.56 billion) and the 36-hole Lakewood Golf Club (HK$90.5 million) adjacent to the land.
Following the deal, LBS announced a dual dividend policy: a special dividend of six sen per share from 2014 to 2017 and a minimum payout of 30% of LBS’s net profit from its financial year ended Dec 31, 2013 (FY13) onwards.
Lim shared that the company enjoys additional forex gain of around RM10 million when it received the 2014 promissory note payment of HK$250 million.
“Our cashflow for the next few years is better with these tranches of payment. Anyway, we can also sell our stake at Zhuhai Holdings if we want,” he said, adding that the share price of Zhuhai Holdings has increased compared to their cost price of HK$1.33 per share.
Zhuhai Holdings closed down one cent to HK$1.33 last Friday, with a market capitalisation of HK$1.88 billion.
On LBS’s move to tighten its grip on loss-making roof-tile maker and builder ML Global Bhd (previuosly VTI Vintage Bhd) by upping its stake in a few open-market transactions lately, Lim said LBS has no intention of taking over ML Global (fundamental: 0; valuation: 0.3).
“We have no intention of a hostile takeover,” he said, adding that LBS bought more shares because it deems ML Global’s valuation “cheap”.
As at Jan 22, LBS is the second largest shareholder of ML Global, which had slipped into Practice Note 17 (PN17) in 2012, with a 22.82% stake.
Some may rightly wonder why the company is investing in the loss-making company, but Lim said there are actually a lot of potential synergies between LBS and ML Global.
“We will try to turnaround the company this year,” he said, adding that LBS may award more contracts to ML Global, which has been immersing itself in construction projects lately.
LBS previously awarded a RM35.9 million contract to ML Global last November.
“Our in-house construction arm (MITC Engineering Sdn Bhd) received invitations to construction jobs but the company is already busy with our own jobs. We can refer these ‘smaller’ jobs to ML Global,” he said.
It is worth noting that in the nine months ended Sept 30, 2014 (9MFY14), ML Global’s net loss had ballooned to RM6.77 million, compared with RM3.2 million a year earlier.
Meanwhile, Lim remains bullish on the local property market despite falling oil prices and the depreciating ringgit.
“Malaysia’s GDP is still expected to grow at 4.5% to 5.5% this year. The younger generation still needs to buy houses. The demand is there for residential units priced RM400,000-RM500,000,” he said.
Hence, LBS is looking at a double-digit revenue growth this year, with a sales target of RM1.1 billion.
“There will be 17 new launches with a total GDV of RM2.45 billion this year,” he said. Most of the launches will be in Klang Valley (Bandar Saujana Putra, D’Island Residence and Desiran Bayu in Puchong), Johor (Batu Pahat, Tampoi and Danga Bay) and Pahang (Kuantan, Cameron Highlands and Genting Permai).
Lim also revealed that LBS will be announcing two development joint ventures in the next few months, but declined to elaborate.
LBS currently has 18 ongoing development projects with a total GDV of RM1.8 billion. Its unbilled sales, as at Dec 31, 2014, was at RM543 million.
As at end-2014, LBS’s landbank stood at 2,138 acres — mostly in Selangor, Johor, Perak and Pahang — of which 1,919 acres have been earmarked for future development.
LBS closed unchaged at RM1.55 last Friday, giving it a market capitalisation of RM821.63 million.
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This article first appeared in The Edge Financial Daily, on February 9, 2015.