Friday 29 Mar 2024
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KUALA LUMPUR: Loss-making property developer Jiankun International Bhd (fundamental: 2.1; valuation: 0) is banking on four development projects in the Klang Valley in the first half of 2015 to return to profitability in its current financial year ending December (FY15).

The group’s executive chairman Datuk Donald Lim Siang Chai, in a recent interview with The Edge Financial Daily, said Jiankun is now in negotiations with a few companies and landowners to jointly develop several residential and commercial developments in the Klang Valley.

“I believe we can confirm one or two projects within the next few months,” he said, adding that if everything goes well, the group should have four secured projects in the first half of the year, followed by related development launches later this year.

Lim, the deputy finance minister between 2010 and 2013, also said that demand for medium to high-end properties is still there, especially among foreign house buyers who are attracted to buy properties in Malaysia in light of the weakening ringgit.

Hence, Jiankun, formerly Nagamas International Bhd, intends to focus on such properties in the Klang Valley this year.

“We are looking at Puchong and Balakong and some terraced house projects,” said Lim, adding that he has just had a discussion with a company on a commercial development in Rawang.

However, Lim declined to reveal the gross development value of any of these projects.

Interestingly, Jiankun, with a net cash and cash equivalents of RM25 million as at end-2014, does not have any land bank in the country at the moment and is talking to several landowners to acquire some parcels. 

Lim said the group expects to seal some deals soon. He also said Jiankun is not opposed to partnering landowners for future developments, if the conditions are right.

“We want to buy land, but land is not cheap. [If] the landowners don’t mind to joint venture with us, they can make more money,” Lim said.

Lim, who had headed three public listed companies before Jiankun  — Lim Kim Hai Holdings, Rahman Hydraulic Tin Bhd and PJI Holdings Bhd — expects Jiankun to turn around in FY15, with a projected net profit of RM3 million.

Jiankun has been suffering losses since 2010 on the back of falling revenue. It bucked the losing trend in FY13 with a net profit of RM4.64 million, which was largely due to a revaluation gain of RM11.09 million from its investment properties. For the cumulative nine months ended September 2014 (9MFY14), Jiankun lost RM1.64 million.

On the group’s fourth quarter results for FY14, scheduled to be released sometime this month, Lim said he expects the company to still record a loss, but a “minimal” one.

Lim said the company had carried out a restructuring exercise at end-2014 to cut losses and clean up its balance sheet to obtain financing for the group to move forward.

“In the past, we have not fared so well — probably due to poor management and other issues affecting the company. This year, with new shareholders coming in and the restructuring completed, we foresee that the company will be able to move forward,” said Lim, who first emerged as a substantial shareholder of Jiankun in January with an 8.91% stake after subscribing to 13 million shares under a rights issue with free detachable warrants. 

However, Lim, who is now Jiankun’s largest shareholder with a 9.23% stake as at Feb 17, according to Bloomberg data, was quick to point out that Jiankun is not entering the Year of the Goat wearing rose-tinted glasses. 

He said the group is well aware that the property market has been cooling since last year and that with the impending goods and services tax (GST) and the difficulties to obtain financing, Jiankun would be “cautious” in its approach to any project.

However, Lim pointed out that the strong relationship with foreign developers would be its strength to gain a slice of the market in the Klang Valley.

“We have good relationships with developers and companies from China, Taiwan [and] Hong Kong. They have interest to move to Malaysia, especially on Malaysia’s My Second Home programme. On this, I think we can capture some [market] share,” Lim said.

He said Jiankun is actually the namesake of Chinese property development firm Jiankun International China Ltd, which holds about 3% equity interest in the company, which it intends to increase soon.

“We know our financials are not as strong as other bigger developers, but we have a foreign partner who has confidence in us — it will come in to help us out, not only financially but also in marketing,” Lim said.

He suggested the government lower the RM1 million minimum to RM500,000 for foreigners to buy condominiums and apartments in Malaysia, though he opined that the minimum should remain for landed properties. 

“They are just buying the air space. If we allow more of them to buy properties, even if it is RM500,000, they will then come in and spend money here,” Lim said.

On its projects in China, Lim said Jiankun had just completed 14 shops in Hui Yang, some 45 minutes from Shenzhen, which are worth more than RM20 million. Jiankun is now looking for tenants.

The counter closed up two sen last Wednesday to 31 sen, giving it a market capitalisation of RM151.68 million.


The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.

 

This article first appeared in The Edge Financial Daily, on February 23, 2015.

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