Mitrajaya to develop landbank



SITTING on land worth over RM600mil, Mitrajaya Holdings Bhd’s market capitalisation appears small at slightly over RM300mil. But that is the problem that almost all companies with property held for development face – the market does not attach a premium for property that has yet to be developed.

In the case of Mitrajaya, it also has RM1.2bil worth of construction contracts to date and the company plans to more than double the order book this year. As for its property division, Mitrajaya plans to launch projects amounting to RM2bil in gross development value (GDV) to realise its value.

A big chunk of Mitrajaya’s fortune lies in its landbank, which is worth about RM620mil and booked at only RM160.55mil in the books.

Speaking to StarBizWeek in an interview, managing director Tan Eng Piow says it will make strategic moves in unlocking the value of its land.

Taking its 3.76ha at Seksyen 28, Petaling Jaya as an example, the plot sits along Federal Highway but as the development along the stretch has not matured yet, Tan prefers to keep it until the time is right.

“Otherwise, we will not be able to realise the best value out of it,” he quips.

Another parcel that it holds for a long time is the commercial land in Puchong Prima, which is ripe to be reaped.

Surrounded by commercial shops, Tan sees an opportunity for a different product that is more in demand now – mixed development.

It plans to launch the RM1.5bil project next year.

“Timing is right as the parcel will be served by the extension of the LRT Ampang Line in the future,” he says.

The upcoming project sits on a 6.07ha parcel, which is the last piece of land available in the enlarged 101.17ha-integrated township development in Puchong Prima.

The proposed mixed development project will consist of a five-storey shopping mall, one budget hotel and three blocks of serviced apartments with a net sellable area of one million sq ft.

“We will build a link bridge to the LRT Station and will work with an international architect for this particular project,” he says.

As for its 4.37ha in Sungai Rengit, Johor, he anticipates to sell it to Petroliam Nasional Bhd (Petronas) as it fall within the development of the Refinery and Petrochemicals Integrated Development (Rapid) project.

“All we can do for that piece of land is to negotiate for a better price, hopefully,” he says.

The parcel is booked at RM4.87mil but the indicative market price is almost four times of its book value at RM20mil.

An analyst says: “As the land cost for Mitrajaya is low, their margins from the property segment should be high.”

The company may be enjoying a good margin by developing from its existing landbank but Tan acknowledges that once its cheap landbank is fully depleted, it will have to change its strategy.

“Our future approach to landbanking will be based on a short-term view, in which we can develop and sell quickly,” he says, adding that it may look at land closer to major developed areas.

In the fourth quarter, it plans to roll out a project in Wangsa Maju with a GDV of RM650mil.

The 17ha parcel is a stone’s throw away from the Sri Rampai LRT station. It plans 565 units of condominiums on the site with sizes of 1,033 sq ft to 2,120 sq ft.

Tan says it took the company a while before the launch of the Wangsa Maju project because part of the land is on hill slope, which is categorised under Class 3 and 4.

Nonetheless, it has used engineering solutions and put in place safety precaution before construction works start.

He says it has received the planning approval and expects to settle to the land issue in the next two months.

Another project it plans to roll out is the 72.84ha at Kuala Langat, with a project value of RM600mil that it plans to launch in 2016.

From its existing and completed projects, it has unbilled sales of RM82.18mil from 280 Park Homes in Puchong Prima, Kiara 9 and four-storey shop offices in Puchong Prima.

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