KUALA LUMPUR: MCT Bhd plans to form a real estate investment trust (REIT) at the earliest by 2020. The REIT would acquire properties MCT has developed, including shopping malls and hotels. The REIT is part of the integrated property developer’s long-term strategy to generate a recurring income stream, contributing some 30% of its net profit. The remaining 70% will be derived from its core property development business.
MCT chief executive officer Datuk Seri Tong Seech Wi said the REIT will be set up once the group has built up a “sizeable” portfolio of assets that generate recurring income.
“A lot of our investment assets are expected to be completed by 2020,” he told The Edge Financial Daily on the sidelines of the recent Invest Malaysia Kuala Lumpur 2015 conference.
“Optimally, all the shopping malls and hotels of MCT will be included in the REIT. We are looking at the long term. It is not a short-term thing,” he said.
To date, MCT has completed property projects in Subang Jaya and Cyberjaya in Selangor, with a total gross development value (GDV) of RM1.32 billion.
The group has ongoing development projects with a total GDV of RM3.02 billion, while its future projects are estimated at RM5.73 billion in GDV.
For Tong, earnings sustainability plays an important role in managing MCT. He believes the group will be better positioned with recurring income generated from the REIT.
“There are companies in Malaysia that are solely property developers. That to me is not healthy because it doesn’t give you sustainability,” he said.
MCT executive director Lim Kok Boon said the REIT will allow the company to unlock the value of its property assets.
“As we progress, we will go into REITs. We will monetise our assets and thus have another round of cash flow to expand [the group],” he said.
Going forward, the group is venturing into luxury hotel development and is in the process of appointing a hotel operator from a shortlist of two international hotel brands.
MCT is currently constructing one hotel in Cyberjaya and will develop two at its One City development in Subang Jaya in the next few months. Construction is expected to complete in four years.
Tong declined to name the hotel brands involved in the negotiations, but said the successful party will operate the three hotels and possibly its existing hotel in Subang Jaya, which MCT currently manages.
“We are going to make a decision soon. The deal should be sealed in a month’s time,” he said, noting that all four hotels are four- to five-star.
Lim said the two international hotel companies are keen to operate MCT’s hotels as “they see value in what we are doing”.
Noting Philippine-listed Ayala Land Inc’s strategic investment in MCT, Lim said the firm will leverage Ayala’s expertise because it has tie-ups with international hotel brands to operate its hotels.
“This is an area that we have sought an opinion from Ayala Land,” he said, noting that this is one of the synergies that MCT can benefit from its stakeholder.
On April 6, MCT was listed on the Main Market of Bursa Malaysia following the completion of its reverse takeover of GW Plastics Holdings Bhd through the acquisition of MCT Consortium Bhd.
The firm’s debut saw the endorsement from blue-chip investors — Ayala Land and pilgrim fund Lembaga Tabung Haji — which acquired 9.16% and 10% stakes respectively in MCT.
MCT’s (fundamental: 1.65; valuation: 0.3) shares closed unchanged at RM1.32 last Friday, bringing a market capitalisation of RM1.76 billion.
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This article first appeared in The Edge Financial Daily, on May 11, 2015.