It is not clear which landbank in particular is being considered for development, but PNB has parcels  such as Darby Park, which is located in Jalan Binjai very close to the KL city centre.

There are also other properties and landbank under PNB, such as those held by its unit Malaysian Industrial Development Fund Bhd, which wholly owns MIDF Property Bhd (formerly Malaysian Industrial Estates Bhd) that has assets around the city centre as well.

In Johor, PNB’s unit Pelangi Bhd has plots of land which could be developed for good returns. “This exercise will unlock the value of several of PNB’s parcels of land which are lying idle now and benefitting the group. This is part of a restructuring exercise for its property wing,” a source familiar with the matter tells The Edge.

At the moment, PNB and its various units have shareholding in property development companies and land banks in various locations, but is fragmented. Other than Pelangi and MIDF Property, PNB and its units also control Island & Peninsular Bhd and Petaling Garden Bhd, and hold large stakes with other property players.

Among these are Sime UEP Properties Bhd, a unit of Sime Darby Bhd in which PNB and its units have about 53% equity; I-Bhd, in which PNB has an 18.5% stake; and S P Setia Bhd in which it holds 26.4%. The latest to join the list is Mah Sing.

Possibly due to the development plan with Mah Sing, PNB has been buying shares in the niche property developer, known for its fast turnaround of small parcels of land to reduce holding costs.

Over the past few months, the state-controlled fund PNB has been aggressively upping its shareholding in property player Mah Sing.

A unit of PNB’s Skim Amanah Saham Bumiputera emerged as a substantial shareholder in Mah Sing early last August, with some 5.3% or 33.2 million shares. As at April 7, Skim Amanah Saham Bumiputera had increased it shareholding to 14.7%, or 92.3 million shares.

Meanwhile, PNB directly emerged as a substantial shareholder in Mah Sing in mid-January, controlling some 31.4 million shares, or 5.1%, in Mah Sing, which brings its total shareholding to slightly below 20%.

In Mah Sing’s annual report, other funds under PNB, such as Amanah Saham 2020, Amanah Saham Malaysia and Amanah Saham Bumiputera, had 2.4%, 2.2% and 2% stakes respectively. It is not clear if any of these shares have been disposed of to PNB or Skim Amanah Saham Bumiputera.

Mah Sing’s controlling shareholder Datuk Seri Leong Hoy Kum has an interest of about 40% in the property developer. According to its latest annual report, other notable substantial shareholders of Mah Sing are Koperasi Permodalan Felda Bhd, which has about 8.5%, Credit Suisse with 7.7% and JPMorgan Chase Bank with 5.4%.

Mah Sing is also among the favourite property stocks. An industry observer says Mah Sing’s business model is attractive, with much of its land bank in prime locations. Also, the company’s margins are good, as much of the land bank was acquired when prices were cheap.

PNB could have been attracted to Mah Sing and proposed the joint venture because of these qualities. According to its latest annual report, Mah Sing has a 4.8 acre plot in Kuala Lumpur, which had a net book value of RM55 million as at end-July 2007, and a 227.3 acre plot in Johor Baru valued at RM55.8 million as at December 2005. There are also several other strategically located land banks in Klang and Ulu Langat, among others.

For FY2008, Mah Sing posted a net profit of RM93.2 million on the back of RM651.6 million in revenue. In contrast to a year ago, net profits improved almost 15% while revenue increased 13.5%.

According to news reports, PNB is looking at consolidating its property business under one company, much like it did with its plantation business under Sime Darby Bhd in 2007.

However, at press time, there was no indication if there would be any involvement by Mah Sing.

Last month, the market was abuzz with talk of PNB looking at consolidating its property business under developer S P Setia.
When queried at PNB’s Malaysian Unit Trust Week 2009 in Johor Baru, S P Setia president and CEO Tan Sri Liew Kee Sin did not deny the rumour but said, “It is too early to comment. This issue is very sensitive. Whatever we do, it must add value to our business.”

According to news reports, the property companies that were to be injected into S P Setia were Island & Peninsular, Petaling Garden and Pelangi. All three were privatised by PNB and delisted between 2005 and 2007.

The news reports stated that the three PNB companies’ revenues in 2008 exceeded RM1.3 billion. For FY2008, S P Setia posted a net profit of RM213.5 million on the back of RM1.3 billion in revenue.

This article appeared in the Corporate page, The Edge Malaysia, Issue 754, May 11-17, 2009.