KSL expects another record year in 2015

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KUALA LUMPUR: KSL Holdings Bhd is set to end the year with a record high net profit, and its executive chairman Ku Hwa Seng is confident of breaking another record next year.

“Next year looks positive — we are set to launch RM6 billion worth of new property projects in 2015-2016, consisting of high-rise apartments, commercial and landed properties,” Ku told The Edge Financial Daily. Some of these projects will spread over four to five years.

KSL had unbilled sales of RM1 billion as at Sept 30, which could last for two to three years.

On top of property development, its KSL City Shopping Mall and hotel in Johor are generating a steady recurring rental income. “I believe that there is still plenty of room for [rental] increment and that it will perform better next year. Demand is very strong in the mall and it is frequented by many locals and Singaporeans,” said Ku.

The KSL City Mall has a high occupancy rate of 95% with a net lettable area of 522,000 sq ft. Its hotel has an average occupancy rate of 75%.

“Our hotel is getting more business and the rates [that we are able to charge] are also rising, especially during weekends and school holidays,” said Ku.

According to him, rental income plus hotel operations generated RM134 million last year. KSL intends to raise its recurring income from its investment properties to 30% of total revenue from about 20% currently within the next three to five years.

These give the Johor-based property developer a good earnings visibility despite the anticipated softer market condition.

KSL posted a net profit of RM210.36 million for the nine months ended Sept 30 of financial year 2014 (9MFY14), which has exceeded the annual profit of RM181.5 million for FY13 ended Dec 31. Earnings per share stood at 54.33 sen for 9MFY14 compared with 46.98 sen for FY13.

The group has enjoyed a healthy profit margin of over 30%. Apart from the group’s cheap land costs as its land bank was acquired before the Iskandar boom, it has an in-house construction arm that helps a lot in saving costs.

“These can save us [margins] of over 20%. We are recession-proof,” Ku said, adding that these are advantages that other developers do not have.

KSL achieved nearly RM700 million worth of new property sales for 9MFY14, with an average take- up rate of its ongoing projects at about 55%.

KSL has resumed paying dividends to its shareholders. The group declared a five sen dividend per share after a one-for-one bonus issue — the first dividend in three years.

At the recent extraordinary general meeting, shareholders approved the proposed dividend reinvestment plan. The reinvestment plan is perceived to be an indication that the group may pay out regular dividends in future.

However, Ku declined to furnish details on KSL’s dividend policy, saying the group is still working on it.

Ku holds a 4.78% direct equity interest in KSL. His family’s investment vehicle Premiere Sector Sdn Bhd controls a 37.47% stake in the property group.

A major project in the pipeline for KSL is a new shopping mall in Klang, which the group aims to emulate the KSL City Mall concept in Johor with about 50 acres (20.23ha) of commercial land planned in stages for development leading to the expansion of the mall.

“This is still in the planning stage but we will bring the Johor [mall] concept over. The first phase is going to be the size of our Johor mall and we are confident that demand will be strong,” said Ku.

KSL’s share price almost doubled from RM2.16 in June to RM4.26 last Friday, giving it a market capitalisation of RM1.66 billion.

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This article first appeared in The Edge Financial Daily, on December 8, 2014.