Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on March 2, 2020 - March 8, 2020

IMAGO, the shopping mall in Kota Kinabalu, Sabah, owned by listed Asian Pac Holdings Bhd, was one of the first in the country to announce a rental discount for its tenants, in light of the tough operating landscape that has been worsened by the Covid-19 outbreak.

The discount was announced more than a week ago, before interim Prime Minister Tun Dr Mahathir Mohamad announced an economic stimulus package last Thursday, where he encouraged mall operators to reduce rents.

Imago views its tenants, patrons and Sabah as an ecosystem that is “undeniably interdependent”, says Asian Pac executive director Raymond Yu Tat Loong.

Rental rates will be halved for existing tenants for two months, from Feb 1 to March 31 this year.

According to the company’s latest results, the mall segment is the highest contributor in terms of earnings — a fairly new trend since the financial year ended March 31, 2018 (FY2018). Prior to this, its property business was the top earner but that has slowed because of fewer launches.

Given this, how much of an impact is Covid-19 expected to have on Asian Pac’s mall business?

In a written reply to The Edge, Yu says: “We are anticipating [that] the next quarter’s earnings will be affected by the novel coronavirus, especially mall operations. Nevertheless, we believe the negative impact is manageable.”

Referring to the “interdependent” ecosystem in the retail sector, he adds: “As the first mall in Malaysia to have taken this step, the rental reduction from Imago is to help our tenants ease their cash flow burden as well as to give them time to plan, organise and restrategise moving forward, and, therefore, to minimise the impact of the novel coronavirus outbreak.

“We believe the impact will be manageable as we had already set in motion plans for Imago, in anticipation, long before this outbreak because we have a comprehensive risk management policy.”

For the cumulative nine-month period to end-December, group net profit increased more than 80% to RM20 million. The mall segment’s profit rose by a third to RM19.4 million.

Asian Pac’s net asset per share rose to RM1.029 as at Dec 31, 2019, from RM1.009 on March 31, last year.

For the full FY2019, mall operations registered RM64 million in revenue and segment profit of RM22.4 million, representing an increase of 22.2% and 48.4% respectively, for the same period last year.

While Asian Pac anticipates that the performance of the mall and car park operations will be affected by the Covid-19 outbreak, the group expects to maintain its property development division’s revenue from ongoing projects for the next quarter.

“On the property side, our strategy is to continue to increase land bank in the Klang Valley and Kota Kinabalu and, at the same time, to work on our newly acquired 74 acres of land in Petaling Jaya,” Yu says.

The Petaling Jaya, Selangor, land has access to major highways including the New Pantai Expressway and Klang-Shah Alam Expressway.

Its current project, Fortune Centra in Kepong, Kuala Lumpur, is a mixed-use development comprising 38 commercial units and 462 condominiums, with a gross development value of RM330 million.

Because of the sluggish economy and novel coronavirus outbreak, Yu says Asian Pac’s strategy will be to continue project development on its own land bank and to attract good tenants to the mall.

The four-level Imago mall — which is five years old this year — has a net lettable area of 800,000 sq ft and some 2,300 parking bays. It has a wide range of shops — from retail to entertainment and dining — offering local as well as global brands, which include Bobbi Brown, Jo Malone London, Dragon I and Nando’s.

In terms of earnings, Asian Pac’s bottom line has been improving despite its revenue decline. For FY2019, Asian Pac’s net profit grew 11% year on year to RM52.7 million while revenue fell 22% to RM144.4 million.

The stock hit a 52-week high of 16.5 sen on April 11, 2019, and 52-week low of 11.5 sen last Friday and ended the day at 12 sen.

 

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