10 May 2014

Daiman plans RM1.4b Johor project

  10 May 2014


DATUK Tong Kooi Ong and his partner from the days of Sunrise Bhd, Datuk Allan Lim Kim Huat, are planning a yet-unnamed RM1.4bil integrated project in Plentong, Johor, that mirrors the trendy Publika in Mont’Kiara with Johor-based Daiman Development Bhd.

The 12.3-acre project has received the necessary approvals from the authorities and is slated to be launched over three phases starting late this year, Daiman chief financial officer Eddie Chan tells StarBizWeek via email.

“We are constantly reviewing the selling price of the three components given the current soft business environment. The project consists of high-rise residences, offices and retail.

“The high-rise development will cater mostly to local buyers and will be priced to make our units affordable.

“Our partners (Tong and Lim) will provide the software, gleaned from their experience developing Mont’Kiara,” he says.

Daiman had last August inked a 50:50 joint venture with Rainbow Crest Sdn Bhd, which is jointly owned by Tong and Lim, and Everest Esplanade Sdn Bhd to develop a parcel of land in Plentong belonging to Daiman.

Under the agreement, Rainbow Crest will provide management services to the joint venture and the initial funding.

“The joint venture will carry out premium mixed-use development that optimises space, design and creativity, delivering a unique real estate proposition comprising street-fronting retail lots for the residence and neighbouring communities, luxurious serviced residence which meets the aspirations and needs of locals and foreigners, and modern office buildings to cater for the growing demand for office space,” Daiman had said in a stock exchange filing.

The Publika mall, an increasingly popular hangout for affluent Hartamas and Mont’Kiara folk, is best known for going against the grain of the conventional shopping complex with its focus on the arts.

It has nurtured a deep connection with the local arts scene and played host to artists and art shows by placing galleries and theater space alongside independent coffee houses and niche boutiques.

In 2010, Tong, Lim and Tropicana Corp Bhd’s Tan Sri Danny Tan Chee Sing had agreed to sell their controlling interest in Sunrise, which is synonymous with Mont’Kiara, to the then UEM Land Holdings Bhd for RM1.39bil in UEM Land shares and loan stocks.

The merged Sunrise-UEM Land is now UEM Sunrise Bhd.

Daiman currently owns more than 2,200 acres in Johor, where billions of ringgit worth of projects are taking shape within the Iskandar Malaysia economic corridor.

While Iskandar Malaysia, a multi-year development spearheaded by Khazanah Nasional Bhd and the state government, is bringing much-needed investment into Johor, there are worries that it is on the verge of an oversupply.

The influx of developers from China, which have been scooping up large amounts of land at record prices to build thousands of apartment units, is also stoking concern, according to property players.

“As an indigenous and a long-term developer, Daiman is concerned about speculative play by developers who come to make a quick profit. Land prices have been driven upwards because of this and consequently, prices of high-rise units are now close to those in Kuala Lumpur.

“There are already indications of oversupply, with the take-up rates of recent high rise launches of below 50%. We believe that demand will not be able to catch up with the large incoming supply,” Chan says.

The group, however, believes that the landed residential segment remains resilient. “Daiman will continue to focus on affordable landed property development,” Chan explains.

Its land holdings will increase by some 300 acres when it concludes negotiations for land in Sedenak in the Kulaijaya district, he adds. “We continue to look for opportunities to grow our landbank both in Johor and elsewhere, but only if the economics makes sense.”

The small-sized developer’s unbilled sales stand at RM70mil currently, with total GDV of RM200mil. It plans to launch more projects within the next 12 months.

Daiman has historically enjoyed pre-tax margins in the region of 30%-40% over the past six years, but it is now seeing headwinds from higher costs and the impending goods and services tax (GST).

“The cost of construction has gone up significantly. Land is more costly and both the cost of materials and labour has risen sharply.

“With the GST in April 2015, developers will have to absorb the input GST, which are not passed on to house buyers via output GST,” Chan notes.

He expects Daiman’s margins to soften by between 5% and 10%.

The cash-rich company has a clean balance sheet with no debt and RM105.17mil in cash and bank balances and fixed deposits, or net cash per share of about 50 sen as at Dec 31, 2013.

For the financial year ended June 30, 2013 (FY13), Daiman paid a dividend of 12 sen per share, or 37% of its earnings per share of 32.7 sen.

It posted FY13 revenue of RM190.45mil and net profit of RM68.86mil, which translates to a net profit margin of 36%.

The low-profile Tay family from Singapore controls some 51% of Daiman.

Daiman’s share price has gained 6% since Tong called it the stock to “buy for your children” in his blog last November.

It closed trading yesterday at RM3.21, up 16 sen, for a market capitalisation of RM676mil.

Johor landmark

Outside of its bread and butter property development business, Daiman is aiming to tap the rising demand for private healthcare and medical tourism in Johor via Menara Landmark, its single largest investment property.

Menara Landmark was built several decades ago but fell into hard times and was subsequently put under receivership in the late 1990s.

Seeing potential in the 35-storey office building’s central location in the heart of the Johor Baru business district and Flagship zone A of Iskandar Malaysia, Daiman acquired the office tower and retail podium for RM55mil through a public auction in 2011.

It subsequently bought an uncompleted hotel adjacent to Menara Landmark for RM45mil in a private treaty.

A key aspect of Menara Landmark is its four-level integrated medical suites, which is the first of its kind in Malaysia to feature a one-stop centre for medical services without a single operator.

The suites are akin to a mall for medical practitioners and specialists. A dialysis centre and legal aid department have started operations there, with oncology, cosmetic and plastic surgery, aesthetic medicine and ageing services to follow soon.

“Compared with Thailand and Singapore, the medical tourism sector in Malaysia is still in its infancy and has strong growth potential.

“This is why several large medical groups are establishing their presence in Johor Baru to capture market share from Singapore,” Chan says.

DoubleTree by Hilton is managing the 30-storey hotel, making it the third under the global hotel chain’s DoubleTree brand in Malaysia.

It features 336 rooms with an estimated average room rate of RM250 per room per night during the initial soft opening period, similar to other four- to five-star hotels in Johor Baru.

When fully occupied, Chan says Menara Landmark is expected to contribute RM10mil in revenue and RM2.7mil in gross profit to the group.

The Grade A office tower, which also serves as Daiman’s corporate headquarters, is currently 75% occupied, and the medical suites about 25% filled.

Daiman is targeting to hit 80% and 50% occupancy for the office and medical suites, respectively, by the end of the year, and work towards 100% occupancy within the next two to three years.


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