Share This

Showing posts with label IJM Land. Show all posts
Showing posts with label IJM Land. Show all posts

Saturday 23 February 2019

Flat property market seen for Penang

https://img3.penangpropertytalk.com/wp-content/uploads/2019/02/pptrends.jpg

Resilient values: Geh believes that both landed and high-rise units in prime locations will hold their values.

Research house says it will be buyers’ market over the short term

THE Penang property market is expected to remain flat yet resilient this year and could bottom out within the next two years.

CBRE|WTW Research in its Real Estate Market Outlook 2019 says it will be a buyers’ market over the short term, particularly for residential properties.

“Under the prevailing subdued market, launches of smaller, single phase developments would reduce in the short-term but larger integrated mixed developments or townships would carry on.

“The property market is anticipated to remain generally soft and flat in 2019. This is in consideration of the challenging global and domestic economy, rising cost of living, as well as supply-demand imbalances, particularly in the high-rise residential sector.”

The property consultancy however adds that Penang’s property market still demonstrates resilience, aided further by recovery in the economy.

“Meanwhile, the current excess in supply will effectively be absorbed by the market. Benefits of reforms undertaken by the new government could also trickle down to the local property market.”

Raine & Horne Malaysia senior partner and FIABCI Malaysian chapter president Michael Geh says transactions and values will most likely remain flat, at best.

“As residential market activity, in terms of transacted units, has been falling over the last few consecutive quarters, at best the year-on-year levels will hold. In light of the overall soft market, property values are not expected to rise in 2019,” he tells StarBizweek.

Malaysian Institute of Estate Agents Penang chairman Mark Saw says the Penang residential market will see “some correction” this year.

“However, long-term planning on infrastructure improvements will go some way towards ensuring those locations currently only accessible by cars are better served with public transport.

“For those who have been holding back their launches the past few years, there may be a need to start selling, especially if land were bought on loans.”

He adds that measures taken by the state government will help to spur the Penang property market.

“With the waiver of the 3% approval fee for foreign purchasers starting from Feb 1, Penang must be seen to be investor friendly and foreign buyers should be encouraged to come.”

Meanwhile, Knight Frank Malaysia in its latest research report Real Estate Highlights for the Second Half of 2018 says the general outlook for the Penang property market “remains mixed without a dominant overall trend”.

“However, resulting from the interplay of supply and demand as well as the general economy, different sectors are performing differently. The residential sector, which is the leading sector in terms of total volume and value of transactions, has shown some improvement during the first half of 2018. “It registered a 5.4% increase in the volume of transactions year–on-year. This trend is expected to continue.”

Saw says prices of landed property in Penang are unlikely to drop.

“However, the high-rise market will remain challenging and developers will need to continue to offer incentives as well as alternate options of home ownership.

“Developers with deeper pockets or less loans may look into rent-to-buy schemes in tandem with the recently-announced National Home Ownership Campaign by the government.”

Geh believes that both landed and high-rise units in prime locations will hold their values, while speculatively-purchased condominiums will be affected.

“Government announcements on transportation plans, infrastructure and stimulus plans are among actions that can help stimulate the Penang property market tremendously,” he says.

Easing overhang

CBRE|WTW Research says the overhang within the Penang residential property market is likely to ease over the next two to three years, with developers offering special packages and postponing launches, all of which would allow demand to catch up with supply.

“The medium to long-term outlook remains positive given that various policies and efforts are being undertaken by the government,” it says.

Citing data by the National Property Information Centre, CBRE|WTW Research says there are over 2,200 high-rise overhang units worth nearly RM1.6bil as at the second quarter of 2018. “This is due to the abundant apartment and condominium units launched, constructed and completed within the past three-to-five years, coupled with the high rejection rate of end financing, unreleased bumiputra units and low demand for units in secondary locations.”

In terms of unsold residential units, CBRE|WTW Research says around 34% or 1,300 of the overhang units are in the RM500,001 to RM1mil per unit price range.

“On the other hand, units priced at RM1mil and above form the bulk (58%) of the total overhang valued at approximately RM1.75bil.

” The property consultancy adds that high-rise projects, particularly, are experiencing increased sales pressure amidst an oversupply situation.

“Under the challenging market, developers have resorted to offering incentives such as rebates on selling prices, zero or low downpayment, easy instalment payment of up to 24 months, deferred payment of (say) 30% of the selling price over five years at 0% interest, free legal fees and one year’s maintenance fee.

“Complimentary packages include interior design package, kitchen and electrical appliance vouchers as well as referral and reward schemes.”

Office and retail markets

Knight Frank Malaysia says the office sector is still enjoying stable rents and high occupancies, pointing out however that the overall occupancy rates in some buildings have dropped marginally.

“This favourable state of affairs is expected to continue for the next few quarters as new supply is only expected to come on-stream beyond 2020.”

CBRE|WTW Research says pent-up demand for newer and prime offices persists in Penang.

“New supply of offices in Penang in the past ten years was limited. New prime purpose-built office buildings completed within the past three years such as HunzaTower and Straits Quay Commercial Suites are enjoying commendable occupancy rates, although charging new benchmark rentals.

“Newly set-up offices, as well as offices relocated from older office buildings, comprise the tenants in these new buildings. Office occupiers are seeking newer office buildings that serve their contemporary needs and enhance their corporate image.”

It adds that pent-up demand for newer and prime offices would continue in the short-term, as most of the upcoming purpose-built office buildings are scheduled for completion in year 2020 and beyond.

“Older buildings are likely to experience a slide in demand thus lower rentals and capital prices.”

CBRE|WTW Research says stable occupancy rates can be anticipated, adding that rentals will increase.

“As at mid-2018, the overall occupancy rate of purpose-built office buildings in Penang declined slightly to 77% from 82% year-on-year. Occupancy rates are anticipated to generally remain in the region of 80% in near future.

“Rentals of prime office space in Georgetown were between RM2.50 and RM3.50 per sq ft. Prime offices outside George Town, particularly newer buildings in Bayan Lepas/Bayan Baru and Tanjung Pinang (Tanjung Tokong), registered higher rentals of RM3.30 to RM4.50 per sq ft.”

Due to increasing maintenance cost, CBRE|WTW Research says rentals of office space in most buildings are expected to increase in the short term.

“The overall average rental of prime offices would also increase, pulled-up by new entrants with higher asking rentals.”

As for the retail sub-sector in Penang, Knight Frank Malaysia says the current supply remains unchanged, adding that a more challenging scenario is anticipated for this sector with new supply to come on-stream with the expected opening of IKEA in Batu Kawan in the current quarter and the extension of Penang Times Square.

“Other retail centres/expansion of retail centres will be adding on the supply in 2020 and 2022.”

CBRE|WTW Research says the retail sector in Penang is likely to be flat, buffered by cautious optimism.

“Mixed performances will be more evident between the better and under-performing retail complexes, of which the latter is likely to drag down the overall occupancy and average rental rates.

“With abundant supply in the pipeline, shoppers can look forward to exciting shopping experiences.”

It says the overall occupancy rate stood at 72% as at mid-2018, with 79% for Penang island and 63% for Seberang Prai.

“Retail lots on the ground floor of selected prime retail complexes on the island commanded higher gross rental rates of up to RM45 per sq ft.”

Meanwhile, Geh says better-managed malls in prime locations are sustainable.

“These malls have sustained rental rates but vacancy factors have certainly increased by 5% to 10%.

“There is no oversupply but a rise in vacancy factors. Going forward, the general population’s purchasing trend remains cautious and wary of big-ticket items.”

Saw is less optimistic about the Penang retail sector, saying “this sector has been saturated for a few years and there is no end in sight”.

By Wugene Mahalingam, The Star

Related:


Real Estate Market Outlook 2019 - CBRE | WTW - C H Williams Talhar ...


Property sector expected to recover in first half
Property sector expected to recover in first half



 



 

 

 

 

 

Property sector may take up to two years to recover



 

Malaysian REITs: Key financials based on various segmentsScepticism over housing policy


Property goodies with Govt and developers offering various incentives

A new challenge for the EPF

 

 
MANY international experts and organisations have expressed concern about the global economic outlook this year.

Tighter monetary policy, weaker earnings growth and political challenges are confronting major economies.

The long-running US-China trade war and uncertainty around the UK’s exit from the European Union have soured business and consumer sentiment in recent months. However, the risk of a recession remains small, say economists.

Thursday 3 November 2016

Penang Star Property Fair at Queensbay Mall 2016

Developers all smiles with results


Great response: Visitors looking at the scale model displayed at the Ideal Property Group exhibition booth at the StarProperty.my Fair at Queensbay Mall in Bayan Lepas, Penang.

GEORGE TOWN: Ten developers generated RM144mil in sales during the four-day StarProperty.my Fair 2016 held at Queensbay Mall.

About RM60mil came from the properties marketed by Zeon Properties Sdn Bhd, which are Ewein Zenith’s City of Dreams, Aroma Development’s Starhill, Devoteshens Sdn Bhd’s My Sakura 28, Tawakar Group’s 98 Residence, Stallion Group’s Vos, and Bionic Land’s Prominence.

The sale of projects from Ideal Property, Asia Green, CI Medini and Aspen Group generated the remaining RM84mil.

Ideal Property general manager (sales & marketing) Nancy Teo said the turnout was not disappointing.

“Given the current economic challenges, we are satisfied with our sales, which was about RM15mil for the past four days.

“There are several hundred potential buyers with whom we need to follow up after the fair.

“They have indicated their interests to view our show units,” she said.

Asia Green creative director Mei Tan said the buyers for QuayWest and The Clovers were those who wanted to upgrade their lifestyle with a new house.

“We sold RM6mil worth of properties during the four-day fair.

“The QuayWest and The Clovers are respectively 50% and 80% sold,” she said.

CI Medini’s marketing director Datuk Seri Jacky Ker said the company generated about RM50mil in sales at the fair with the sale of 70 units of multi-storey shop units in the Ion Axxes project.

Developers such as IJM Land Bhd, Mah Sing Group Bhd, Sunway Bhd and Eco World Development Group Bhd also received overwhelming responses for their projects.

Mah Sing senior chief operation officer Seth Lim said a big pool of visitors were young families.

“Some of the buyers looked into getting a second property or explored investment opportunities.

“We are happy with the response as we were able to secure a few hundred registrations,” Lim added.

EcoWorld general manager Khoo Teck Chong said the group received hundreds of enquiries for the Eco Bloom project in Simpang Ampat.

“Taking advantage of the low interest rates in the market, we also plan to launch the RM8bil Eco Horizon and Eco Sun mixed-development projects in Batu Kawan next year,” Khoo added.

IJM Land senior general manager Datuk Toh Chin Leong said the group planned to launch the Waterside Residence project for the second phase of The Light Waterfront scheme next month.

“The sales of our current projects like the Trehaus in Bukit Jambul and Permatang Sanctuary in Bukit Mertajam should help us achieve the targeted RM240mil revenue for Penang.

“Last year, the revenue contribution from Penang was RM168mil.

“Next year we will launch the Senjayu in Jawi, 3 Residence at Karpal Singh Drive and The Terraces Condominium in Bukit Jambul,” Toh added.

Experts share nuggets of wisdom with house-hunting visitors at the fair




PENANG, acknowledged by CNN as one of the best places to retire in the world, continues to attract numerous interest in its property sector, said Zeon Properties group chief executive officer Leon Lee.

He said Penang partnering Temasek Holdings in developing the Penang Technology Park would create 30,000 job opportunities in the near future, and this would in turn boost the property demand.

“The state recorded 10% growth in arrivals via the Penang International Airport in 2014 from six million to 6.6 million in 2015. And it is expected to increase to eight million this year.

“A growing economy, international recognition from our various accolades, improved state policy and welfare as well as the moderate cost of living will continue to attract people.

“On the island, 67% of the land is occupied by hills and forest reserves which cannot be used for development. This is why property prices will continue to soar,” he said in his talk on ‘Penang Property Outlook: Why Invest in Penang?’ at the StarProperty.my Fair 2016 in Queensbay Mall.


 Meanwhile, Prof Joe Choo said first-time home buyers should weigh their decision carefully in picking the property.
 
In her talk on ‘Feng Shui Tip to Enrich Your Life’, she advised those buying their second property for business or to upgrade to ensure that it faced the same direction as the first one because that was the direction where they made their money.

Property investors were also urged to bear in mind the ‘stay, work and play’ motto before buying properties.

Freemind Works founder and property investment coach Kaygarn Tan said an ideal investment should come from city living that integrates the way in which people live, work, shop and play.

He cited Bayan Lepas as a good example in his talk ‘How to Get Better than Average Rental Yield’.

“We have Queensbay Mall and the Bayan Lepas Free Trade Zone in the area.

“So getting a property here is a good option as the elements of work, play and shop will surely complement the living aspect.

“Remember, all the components must co-exist within a 5km-radius,” he said.

Meanwhile, Diligent Planners Sdn Bhd founder Vince Chia said young people should get their first home even if it had to come from the secondary market.

He said houses priced between RM200,000 and RM250,000 in the secondary market were considered good options.

“Servicing a bank loan of less than RM250,000 should be considered comfortable for a fresh graduate with a RM3,000 monthly income.

“After all, you will probably be staying alone at first. You can upgrade in a few years’ time.

“If you are getting a ‘start-up’ home, forget about getting a house worth more than RM700,000.

“It’s a burden,” he said in his talk titled ‘Easy loan approval like 1-2-3’.

Full-time property investor and trainer Rachel Lim encouraged the visitors to look at the rental and capital appreciation of properties before investing.

“Do not simply jump into an investment but instead look for fundamentally good properties.

“It is a ‘bargain sale market’ during an economic slowdown. We should be excited, grab the opportunity and buy good properties,” she said in her talk on ‘Boom or Burst 2017 Malaysia Property Market.

REI Group of Companies CEO and co-founder Dr Daniele Gambero spoke on ‘Penang Transportation Master Plan: The Secret Unveiled: 10 Years Gold Mine for Smart Propenomy Investors’.

LRT project boost for property near FIZ - Properties around industrial zone soaring in value due to upcoming LRT project





“One of them is the Trehaus project which comprises condominium villas and semi-detached villas,” she said.

PROPERTIES located within the proximity of the Free Industrial Zone (FIZ) which has been earmarked for the LRT line were the most sought-after at the StarProperty.my Fair 2016 in Penang.

C.M. Ong, 32, who works in Bayan Lepas, said he was looking for a high-rise unit near the FIZ as an investment which could generate better yield in rental.

“It is good to consider a location where there will be major infrastructure developments.

“The area is also close to the Queensbay Mall.

“I understand that the property value in FIZ has shown a steady increase for the past five years due to the number of fresh amenities in the area,” he said yesterday.

He was checking out the condominiums in Tropicana Bay Residences in Bayan Mutiara by Tropicana Ivory Sdn Bhd.

Air freight clerk Naseem Ali Shaik Othman, 38, said the Triuni Residences within The Sanctuary masterplan by the Runnymede Group of Companies offered the best of both worlds as an urban resort condominium.

“The appeal is the location in Batu Uban, where it is easily connected to the Bayan Lepas area and George Town. We like the urban setting, the sea view and resortstyle amenities,” he said.

The father of four said the gated and guarded safety feature would also provide a safer environment and community to raise a family.

Administrator Nor Syahira Roslan, 23, said her preferred location was Bukit Jambul as it was close to her parent’s house.

“I would prefer a landed property as it offers better privacy.

“The value of a landed property, as I understand, also appreciates faster and is more stable.

“The Bukit Jambul area has a wide range of landed properties up for sale.

“One of them is the Trehaus project which comprises condominium villas and semi-detached villas,” she said.  - The Star

Related posts: 



Penang has dislodged Kuala Lumpur's Golden Tringle as the top investment choice GEORGE TOWN: Penang has now overtaken the Klang ...


Apr 9, 2016 ... High cost under new law may affect property investors ... Aug 17, 2015 . ... Property prices will hold . ... Oil Prices: What's Behind the Drop?
 
Oct 1, 2016 ... Lim expects house prices to be flattish or slightly weak depending on locations .... Penang has dislodged Kuala Lumpur's Golden Tringle as the top investment choice GEORGE TOWN: Penang has now overtaken the Klang.
 
 Malaysian property market correction to continue in 2016 ... May 7, 2016 ... Lim expected property prices to plateau for the next few years before the next upcycle. ... Labels: 25 years economic cycles , investments , Malaysia .....

Tuesday 29 December 2015

Developers shift focus to higher-priced residential properties in Penang; Busy in construction sector 2016

Projects worth RM41bil in Penang next year

 
Chan: ‘We still foresee the volume and value transactions of properties to contract in 2016. However, the contraction this time won’t be so sharp." (Default Alternate Text: "Chan: ‘We still foresee the volume and value transactions of properties to contract in 2016. However, the contraction this time won’t be so sharp.

GEORGE TOWN: Five developers will undertake RM4.33bil in property projects in Penang next year despite a challenging year for the property market.

The developers planned to price their mostly residential properties from between RM480,000 and RM3.3mil.

The price range came on the heels of this year’s launches of between RM200,000 and RM400,000 in strategic locations.

The developers would be shifting their focus to higher-priced residential properties.The condominium units in Bayan Lepas will be from 1,000 sq ft and priced from RM480,000 while three-storey houses with built-up of 5,300 sq ft will be priced at RM3.3mil in Seri Tanjung Pinang.

The developers are IJM Land Bhd with gross development value (GDV) of RM415mil, Ideal Property Group (RM1.46bil GDV), Hunza Properties Bhd (RM600mil GDV), Eastern & Oriental Bhd (RM650mil GDV) and Mah Sing Group Bhd (RM1.2bil GDV).

Real Estate & Housing Developers’ Association (Penang) chairman Datuk Jerry Chan told StarBiz that developers could be shifting their focus to properties priced from RM400,000 as there was a large supply of housing priced between RM200,000 and RM400,000 targeting first-time buyers.

This did not mean that buyers have lost interest in affordable housing with built-up of 900 sq ft and priced from RM500 to RM600 per sq ft.

Chan pointed out that developers would continue to build housing in the affordable range to leverage on the higher density for plots of land but there would be a gradual shift to the “non-affordable” range.

He added that there would be fewer launches in 2016, due to the difficulties in obtaining bridging and end-financing loans from banks.

Referring to the incoming supply of housing that were currently under construction, Chan said this would be spread over a five- to 10-year period, depending on market demand and the size of the schemes.

The National Information Property Centre (Napic) report revealed that the state would see an incoming supply of 72,114 units into the market.

According to the Napic report, the existing stock of houses in the state stood at 393,303, compared with 383,484 in the first half of 2014.

“We still foresee the volume and value transactions of properties to contract in 2016. However, the contraction this time won’t be so sharp,” Chan said.

Ideal executive chairman Datuk Alex Ooi said the group had developed 4,840 units of affordable projects on the island for the last two years.

“We have sold about 60% of these properties. Moving ahead, the strategy is to move into the non-affordable range priced between RM400,000 and RM600,000.

“Ideal Property still has around 300 acres of land bank on the island. We have some 25,000 units of properties planned for the land bank.

“There are still 8,000 units of properties with more than RM4bil in GDV to be implemented over the next 10 years, priced between RM400,000 and RM600,000,” Ooi said.

‘Moderate to flat’ outlook

Ooi expected property market conditions to be “moderate” to “flat” in the coming year.

Mah Sing (North) senior general manager Law Wei Keong said the company had recently completed a survey on the preference of housing products in the country.

“The study revealed that a majority of the 6,000 surveyed favoured houses priced in the range of RM500,000 to RM700,000,” he said.

Of the RM2bil worth of housing projects launched in the country this year, about 16% were priced from RM1mil, while the remaining 84% are below RM1mil, according to Law.

IJM Land senior general manager (north) Datuk Toh Chin Leong said despite the weak market sentiment, the company would continue to launch properties priced below RM800,000.

“It will be a slow year for the property market in 2016,” Toh said.

 TrehausIJM Land’s pipeline of projects for next year in Penang included the RM232mil Waterside Residence in The Light Waterfront project next to Penang Bridge, the RM64.7mil Trehaus Condo Villa scheme in Bukit Jambul, and the RM118.4mil Senjayu Terrace project in Jawi, South Seberang Prai.

The Trehaus and the Waterside Residences scheme would be launched in the second quarter of 2016, while the Senjayu Terrace would be introduced in late 2016.

“The price of the three property schemes ranged between RM730,000 and RM1.3mil,” he said.

Meanwhile, Ideal would be launching the RM460mil Forestville, RM600mil Queens Waterfront Residences, and RM400mil Camerlina, located in Bayan Lepas, priced between RM480,000 and RM800,000.

“There is still growing need for mid-range houses that is reasonably priced, located within mature township, surrounded and supported by amenities such as schools with good accessibility, lower density with lifestyle concept,” he said.

Eastern & Oriental will develop the recently launched RM482mil Tamarind and 50 units of terraced houses with a RM168mil GDV in Seri Tanjung Pinang.

The Tamarind units, ranging between 1,000 sq ft and 1,770 sq ft, are priced around RM691,000 and RM1.16mil, while the terraced units, with built-up areas of 5,300 sq ft, are priced from RM3.3mil.

Its general manager (marketing and sales) Christina Lau said the Tamarind was scheduled for completion in 2019.

No date has been set for the completion of the 50-terraced properties.

Mah Sing to unveil Ferringhi Residence 2

Mah Sing will launch the RM735mil Ferringhi Residence 2, the RM350mil Icon Residence and an unnamed RM150mil project in Southbay City, Batu Maung.

“We are targeting the Ferringhi Residence 2 launch in the first quarter,” Law said.

The Ferringhi Residence 2 consists of three blocks offering 632 units with built-up areas from 1,208 sq ft to 2,910 sq ft, priced from RM775,265.

Law said the pricing for the unnamed project would be below RM680 per sq ft.

“The units have built-up areas of 750 sq ft to 1,000 sq ft,” he said.

Meanwhile, Hunza will develop the RM600mil Alila 2 project in Tanjung Bungah, 270 units which have built up of between 1,900 sq ft and 3,300 sq ft, priced from RM775 per sq ft.

“We will promote the 9.8acre project in Indonesia, Hong Kong, and Singapore early next year.

“The key attractions are the size of the units, which are extremely scarce on the island nowadays,” group managing director Khor Siang Gin said.

By David Tan The Star

Construction sector to be busy in 2016 with projects worth RM83bil 


KUALA LUMPUR: WITH over RM83bil worth of infrastructure jobs to be awarded next year, it is going to be a busy year for the construction sector in 2016.

“The 11th Malaysia Plan unveiled in May 2015 has reaffirmed the strong pipeline of construction jobs till 2020. The record awards of project delivery partners (PDPs) for four major infrastructure projects with total value of RM80bil have further reiterated the potential works,” said Maybank IB Research in a recent strategy report. This flow of contracts if they are rolled out according to plan, is a new record, outpacing the high of RM28bil dished out in 2012.

The strong job flows are expected to be driven from new tenders in public transport, oil & gas downstream infrastructure and water-related jobs.

New award phase for the Klang Valley Mass Rapid Transit Line 2, is set to take off from the first half of next year while the other rail project coming on strean is the Klang Valley Light Railway Transit (KVLRT) 3. The Gemas-JB double track, which is being reviewed, is another potential.

The total value of rail-related construction jobs was estimated at RM39bil in the medium term, said CIMB Research. “These could be broken into 17-20 chunky packages worth between RM800mil and RM1.5bil each, excluding underground portions,” the research firm said in its recent outlook report.

As for highways, there are the RM4.2bil Damansara-Shah Alam Highway (DASH), the Sungai Besi-Ulu Kelang Elevated Expressway (SUKE), and the remaining West Coast Expressway (WCE) packages to be awarded. In East Malaysia, eleven more packages of the 1,090km Pan-Borneo Highway is expected to be tendered out in phases next year.

As for oil and gas infrastructure, Petronas’ Refinery and Petrochemicals Integrated Development (Rapid) project in Pengerang, Johor, is expected to see investments worth RM18bil based on Budget 2016.

On water-type contracts, CIMB Research reckoned that over RM2bil worth of jobs could be dished out and this excludes potential jobs from the private sector side.

The country’s strengthened ties with China have also injected further optimism into the construction sector.

“Chinese contractors have expressed interest in the rail projects, specifically, the Gemas-JB double track rail and Kuala Lumpur-Singapore high speed rail. Local contractors could partner them in bidding for the projects. With the Chinese companies’ ability to offer attractive financing packages, this would raise their chances of winning the projects, while allaying concerns on project funding issue,” said Maybank Research.

One other key project to watch for is the Penang Transportation Master Plan (PTMP) that is said to have contract value of RM27bil.

As for stock picks, Maybank IB Research has Gamuda Bhd at its top pick. The stock was a likely beneficiary of the PTMP and could also clinch additional jobs from the mega rail projects including KVLRT 3 and Gemas-JB double track rail, the research firm said.

CIMB Research also has Gamuda as its big-cap pick for the largest exposure to MRT 2. Among small/mid-cap it has Muhibbah Engineering Bhd as the preferred stock for the company’s US-dollar theme and exposure to Petronas’ Rapid.

“In the water segment, Salcon Bhd could emerge with a bigger share of wins. The company’s tender book currently stood at RM1bil to RM2bil,” said CIMB Research.

On the other hand, Public Invest Research has a neutral “call” on the sector as “most of the counters under our coverage were already fairly valued.”

“Currently, the construction index is priced at 13 times one-year forward earnings, which is also equal to its long-term mean. Hence, we believe the sector is fully valued for now, with most positives already priced in.”

As for stock picks, the research firm favours WCT Holdings Bhd as its job replenishment was better than expected with RM2.7bil clinched to-date, bumping up its unbilled orderbook to more than RM5bil. “Hock Seng Lee Bhd is expected to benefit from the Pan Borneo project, while Gamuda also looks attractive after the stock dipped below our fair value.”

By Gurmeet Kaur The Star

Thursday 23 April 2015

IJM's outlook downgraded to negative, debt notes reaffirmed by MARC


MARC: IJM Corp outlook downgraded to negative

KUALA LUMPUR: Malaysian Rating Corp (MARC) has affirmed its AA- rating on IJM Corp Bhd’s RM1 billion debt notes but downgraded its outlook to negative from stable.

The ratings agency said decline in palm price to current low levels of RM2,200 per tonne and the weak near-term outlook of the sector would likely drag IJM’s plantation division’s earnings.

MARC also noted that the slowdown in the property sector has seen demand moderating at several of IJM’s projects.

MARC said IJM's RM1 billion debt notes involved the commercial paper/medium-term notes programme (CP/MTN).The outstanding notes under the programme comprise RM300 million CPs and RM250 million MTNs.

“IJM's borrowings have steadily increased, standing at RM6.3 billion as at end-December 2014,” MARC said, adding at the holding company level, the borrowings amounted to RM1.3 billion.

The rating agency highlighted IJM’s funding of infrastructure projects and capital requirements for its oil palm plantings in Indonesia could further pressurise its credit profile.

On the other hand, MARC observes that IJM’s orderbook for construction division has improved to about RM7.2 billion as at end-financial year 2015. “The improved prospects for the construction division may provide some buffer against weaker performance in the other divisions,” it said.

Going forward, MARC may raise the group's outlook to stable if it is able to show financial resilience in restoring cash flow protection measures.- New Straits Times

IJM’s debt notes rating reaffirmed, MARC also revises the company's long-term rating to negative from stable 

PETALING JAYA: Malaysian Rating Corp Bhd (MARC) has affirmed its AA- rating on IJM Corp Bhd’s RM1bil debt notes.

In a statement yesterday, MARC said it had also revised IJM Corp’s long-term rating to negative from stable, due to the challenging outlook for the company’s core business.

“The negative outlook incorporates the challenging prospects for IJM group’s core businesses, namely, the palm oil and property development sectors, from which the group generated a combined 45.3% and 60.6% revenue and pre-tax profit for fiscal 2014,” said the rating house.

MARC added that the sharp decline in palm oil prices from last year and the weak near-term outlook for the sector would drag the group’s plantation division earnings.

“The sharp decline in palm oil prices since April 2014 from RM2,800 per tonne to about RM2,200 per tonne currently and the weak near-term outlook for the sector would further weigh on the group’s plantation division earnings.”

The rating agency also said the slowdown in the property sector had seen demand moderating for several of IJM’s property development projects.

“Against this backdrop, MARC observes that group borrowings have steadily increased, standing at RM6.3bil as at end-December 2014. At the holding company level, its borrowings stood at RM1.3bil as at end-December 2014,” it said.

Meanwhile, MARC said the RM1bil debt notes involve the commercial paper/medium-term notes programme (CP/MTN). The outstanding notes under the programme comprise RM300mil CPs and RM250mil MTNs.

It said the funding for the group’s infrastructure projects and capital requirements could add further pressure on its credit profile.

MARC noted, however, that the group’s orderbook for its construction division had improved to about RM7.2bil as at end-financial year 2015.

“The improved prospects for the construction division may provide some buffer against the weaker performance of the other divisions,” it said.

Going forward, the rating agency said it may revise the group’s outlook to stable, if the group was able to show financial resilience in restoring cashflow protection measures, reflecting the credit strength.

“The long-term rating, however, could be lowered should key financial metrics deteriorate due to weakening performance of key business segments and/or additional increase in borrowings,” it said.

Separately, BIMB Securities Research said it was optimistic on the related-party transaction involving the transfer of The Light Waterfront development in Penang from Jelutong Development Sdn Bhd to Aura Hebat Sdn Bhd (AHSB). Both companies are subsidiaries of IJM Corp.

“We are positive on the development, as it will provide an avenue for prodigious development on the land.

“No significant impact to our 2015 and 2016 earnings forecast, as construction will start later in the year,” said the research house.

AHSB will acquire The Light Waterfront development from Jelutong Development, an 80%-owned subsidiary of IJM Properties Sdn Bhd, for RM402.8mil, subject to, among others, the receipt of documents of title to the property from the relevant Penang authorities..

Sources: The Star/Asia News Network