Multi-Purpose moves to unlock land value

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KUALA LUMPUR: The development of large tracts of land owned by Multi-Purpose Holdings Bhd (MPHB) in Rawang and Gombak, Selangor and Penang, together with Bandar Raya Developments Bhd, may be a catalyst for the re-rating of Multi-Purpose.

Last Friday, Bandar Raya’s wholly-owned subsidiaries signed three joint venture agreements with subsidiaries of MPHB to develop a total land area of 670.078 acres (268ha) with a combined gross development value (GDV) of around RM4.25 billion.

MPHB owns the land while Bandar Raya is the developer. Analysts welcomed the tie-up, noting that it would create a “win-win” situation for both parties.

“Bandar Raya, with its strong branding as a premium developer, will increase the value proposition of MPHB’s projects. At the same time, the joint venture gives MPHB access to a large landbank, as its own prime development landbank in the Klang Valley is depleting,” the analyst said.

Incidentally, Bandar Raya used to be part of MPHB. It was the conglomerate’s property development arm until late 2002, when it sold a 32.8% stake to Datuk Mohd Moiz, Bandar Raya’s current chairman.     

Analysts said the development of these pieces of land was part of MPHB’s plan to rationalise its non-core assets in order to focus on its core gaming business.

Its other non-core businesses are in stockbroking, general insurance and hospitality. Aside from the parcels of land in Rawang, Penang and Gombak, MPHB’s key properties in Malaysia include Menara Multi-Purpose and a 2.85-acre tract in Jalan Imbi, which according to UOB KayHian has a GDV potential of RM3 billion.

Upatkoon: The joint ventures will allow us to unlock the maximum values of these pieces of land.

In a report in March, UOB KayHian wrote that MPHB had a three-year target to transform itself into a high-yielding gaming company by monetising its investments and landbank.

“By then, Magnum would have substantially paid off much of its bank debt, and MPHB may be in a position to gear up and dole out more cash to shareholders. It could be in a position to give out partial proceeds arising from any successful monetisation exercise, subject to its bank loan covenants,” the report said.

In a report in early February, ECM Libra noted that MPHB’s divestment programme and landbank development would be the next re-rating catalyst for the counter.

The Gombak land is the site of the Mimaland recreation park, which ceased operations in 1993. Its redevelopment involves the development of seven parcels of leasehold and freehold land measuring 324.051 acres with a projected GDV of RM2.2 billion.

The project in Rawang to develop two parcels of land measuring 265.13 acres has a projected GDV of RM1.4 billion. Its residential component will consist mainly of landed homes.

The Penang project on 80.9 acres is to build a low-density, gated development comprising bungalows, semi-dees and condominiums with sea views. It has a projected GDV of RM605 million.

The launches of these projects are slated for 2013.

Datuk Surin Upatkoon, CEO of MPHB, said in a statement that the joint ventures are part of the company’s asset rationalisation programme pursuant to the acquisition of 100% of Magnum Holdings Sdn Bhd.

In February, MPHB proposed to acquire the remaining 49% equity not owned by the company from CVC Capital Partners in a RM1.637 billion deal.

“During the restructuring of Magnum in 2008, MPHB cherry-picked certain non-core assets including these strategic parcels of land in the Klang Valley and Penang, to boost its investment portfolio. The joint ventures will allow us to unlock the maximum values of these [pieces of land] over the next decade,” Upatkoon said.

MPHB last Friday announced to Bursa Malaysia that its 33.01% associate Philippine Racing Club Inc had entered into a master development agreement with Ayala Land Inc to develop a 21ha property in Makati City, the Philippines.

According to MPHB, the estimated GDV of the proposed project is 70 billion Philippine pesos (RM5 billion).

“Based on this assumption, our associated company’s share of GDV would be approximately 12.6 billion pesos,” it said.

MPHB closed two sen higher at RM3.14 last Friday with 2.78 million units traded.

This article appeared in The Edge Financial Daily, May 3, 2011.