Friday, 14 October 2011 12:17
KUALA LUMPUR: CapitaMalls Malaysia Trust’s (CMMT) distributable income in the third quarter ended Sept 30, 2011 (3QFY11), rose 40.6% to RM29.7 million from a year ago on higher property income and gross revenue.
Revenue increased 33.3% to RM57.84 million from RM43.39 million.
CMMT’s distributable income rose on net property income of RM41.1 million (35.6% higher than 3QFY10) and gross revenue of RM57.8 million (33.3% higher than 3QFY10), said CapitaMalls Malaysia REIT Management Sdn Bhd (CMRM), the manager of CMMT, in a press release yesterday.
For 3QFY11, CMMT distribution per unit (DPU) increased by 26.9% to 1.98 sen compared with 1.56 sen a year ago.
Based on CMMT’s closing price of RM1.28 per unit yesterday, its DPU of 1.98 sen translates to an annualised distribution yield of 6.1%, said CMRM.
CMRM chairman Kee Teck Koon said the stronger results were boosted by the Gurney Plaza extension in 3QFY11, the acquisition of which was completed on March 28.
“Since then, we have announced another acquisition of East Coast Mall in Kuantan, which is expected to be completed by year-end. We continue to actively look for acquisition opportunities as part of our growth strategy to enhance unit holder value,” he said.
Sharon Lim, CEO of CMRM, said East Coast Mall is expected to contribute over RM20 million in net property income per year to CMMT’s existing portfolio.
Lim said CMMT had a near full occupancy rate of 98.7% across its portfolio and rental renewal increases of 6.7%.
“Our asset enhancement works at Gurney Plaza are progressing well and on track to be completed by year-end, and will start contributing to our income from next year onwards,” Lim said.
A “pure-play” shopping mall REIT, CMMT’s portfolio comprises Gurney Plaza in Penang, The Mines in Selangor, and an interest in Sungei Wang Plaza in Kuala Lumpur. The portfolio has a total net lettable area of over two million sq ft.
For the cumulative nine-month period, CMMT’s distributable income quadrupled to RM85.4 million from RM21.1million a year ago while revenue more than tripled to RM167.7 million from RM43.4 million.
Shares in CMMT closed unchanged at RM1.28 yesterday.
This article appeared in The Edge Financial Daily, Ocotber 14, 2011.
Monday, October 17, 2011
Headwinds for education stocks
KUALA LUMPUR: The education sector was once an investor darling, but counters like HELP International Corp Bhd and Masterskill Education Group Bhd have headed south due to sector-wide over-expansion, rising competition and lower student intake.
Last month, RHB Research downgraded the sector to “neutral” on fears of a weak market outlook.
“We are turning cautious on prospects for the education sector in the coming quarter given rising macroeconomic headwinds, illiquidity of the stock in the sector, the relative small market cap of education stocks, and high foreign ownership,” it said in the Sept 29 report.
It downgraded HELP and Masterskill to “underperform” from “outperform” and “market perform”, while maintaining an “outperform” call on SEG International Bhd (SEGi).
RHB Research said education stocks were driven by Economic Transformation Programme (ETP) news flow in the past, but now the excitement has begun to recede.
“Entry point-projects (EPP) involving SEGi, such as the establishment of the Early Childhood Care and Education (ECCE) hub and the SkillsMalaysia INVITE programme, are already underway, while the announcement of the gradual liberalisation of the education sector under the Strategic Reform Initiatives is already priced in,” it said.
The research house has cut its FY12 price-earnings ratio (PER) by one or two times for the sector as its previous valuations were “overly optimistic” given the bearish outlook.
The poor outlook for the sector may be evident from the poor showing in financial results for some companies.
For 3QFY11 ended July 31, HELP’s net profit dived 92% to RM245,000 compared with RM3.24 million a year earlier. Its revenue, however, was flattish at RM23.96 million compared with RM23.38 million a year ago. For the nine months to July 2011, HELP’s net profit fell 25% to RM9.48 million, despite a 2.3% increase in revenue to RM79.63 million.
Similarly, Masterskill’s net profit fell 48% to RM11.58 million for 2QFY11 ended June 30, compared with RM22.43 million a year earlier.
Adam Chan Eu-Khin, HELP director of corporate planning, said the drastic fall in profit was mainly due to a one-off RM5 million cost to relocate its HELP ICT College from Klang to Fraser Business Park in Kuala Lumpur.
“As a result, we had to delay enrolment for our new courses as well,” he said.
Analysts, however, have noted that HELP’s earnings would still be flattish on a year-on-year basis without the RM5 million relocation cost.
“The delay caused HELP to postpone enrolment and marketing campaigns for new courses for the January/March intakes this year, which were reflected mostly in the 2QFY11 numbers,” said InsiderAsia in a recent report. It added that with HELP’s promotion to university status, it had to increase its manpower costs.
HELP was elevated to full university status in September, joining the ranks of the country’s 26 private universities.
HELP also saw its intake in Vietnam postponed due to a quality test by the government earlier this year, and had to incur cost to transfer its twinning programmes from HELP University College to HELP Academy.
Despite these headwinds, HELP is optimistic for better days ahead.
“The Vietnamese government has given the green light and we now have 50 students. We are beginning to market and recruit more students and hope to enroll 200 students by end-2012,” said Chan. He added it will also begin marketing to recruit more students after the relocation of its facility to Fraser Business Park.
Chan noted that the weakening US dollar has caused many Chinese students to pursue their education directly in the US and UK instead of Malaysia, and this will be a continuing trend in the future.
He added that given the recent termination of the joint-venture (JV) with Asia Pacific Land Bhd (AP Land), HELP will postpone its expansion plans in China indefinitely.
OSK Research analyst Kong Heng Siong said the termination of the JV with AP Land is a blessing in disguise as HELP would then be able to focus on marketing and improving its operations in the local and Southeast Asia markets.
“If you look at HELP’s operations, it has a firmer presence in Southeast Asia than China. It should definitely focus on recruiting students in this market as Malaysia will become a very attractive destination for tertiary education for those who cannot afford to go to US and UK,” he said.
Kong said he is unperturbed with the RM5 million relocation cost and expenditure to hire new staff, as the “short-term pain” is necessary to secure long-term growth for the group.
“However, HELP is still a niche player and it needs to diversify its offering in order to be able to attract more students in the future. HELP is expanding now, but it needs to ensure that it has enough students to fill the capacity,” he said.
An analyst with InsiderAsia noted that SEGi had experienced a similar gestation period when it expanded in the past, and is confident HELP’s earnings growth will recover in the future.
He said SEGi took a long while to digest all its acquisitions, brands and products.
“It was only in early 2010 that investors really took notice of SEGi’s turnaround and the stock price surged,” he said.
Earlier in the decade, SEGi’s profitability was low. Between 2001 and 2005, it offered courses under different brand names, such as Prime and Systematic. In 2006, the company streamlined its operations and consolidated into six large branches, including its flagship campus in Kota Damansara and used a single “SEGi” brand name.
By 2008, the fruit of the exercise was reaped, as SEGi’s pre-tax profit soared to RM9.88 million from RM2.48 million in 2007. It rose further to RM14.61 million in 2009 and RM54.31 million in 2010.
While the opening of the Fraser Business Park branch this year and the new Subang 2 campus in 2013 could cause some volatility in HELP’s medium-term earnings, the analyst is optimistic it will set the foundation for stronger growth in the future. “HELP is investing for the future,” he said, adding that another avenue for growth is its planned diversification into the lucrative private secondary education segment.
Kong said there are few catalysts that would re-rate HELP at the moment but there could be a minor improvement in profit for 4Q, depending on student intake in September. He added that HELP could propose a capital exercise to raise funds to build its flagship campus at Subang 2, which would also make its shares more liquid. OSK Research has a fair value of RM1.99 for HELP.
As for Masterskill, Kong said the stock has been battered down due to late student intake and reduction of National Higher Education Fund (PTPTN) loan approvals. About 95% of Masterskill students depend on PTPTN for funding.
“Masterskill has also seen some new competition in the healthcare education business. Just like HELP, Masterskill will need to diversify its offering,” he said.
OSK Research has a “trading buy” call on Masterskill with fair value of RM1.91.
Masterskill now has to contend with a new competitor in the form of KPJ Healthcare Bhd, Malaysia’s largest private hospital operator.
In July, KPJ’s education subsidiary, KPJ International College of Nursing and Health Sciences (KPJIUC), attained university college status, giving it a boost in academic standing and the ability to grant its own degrees. KPJ plans to invest RM120 million to expand its Nilai campus and aims to see a student enrolment of 10,000 by 2015.
Datin Siti Sa’diah Sheikh Bakir, KPJ managing director, has said the institution aims to acquire the status of a full-fledged university by 2016.
KPJ has a large infrastructure of hospitals, doctors and nursing staff which can support its courses, provide its students on-the-job training and give them future employment opportunities.
While Masterskill has no hospitals, it may have better economies of scale, with a revenue base about 10 times higher and a student base seven times larger than KPJIUC’s.
HELP has lost 40.5% from its 52-week high of RM2.84 to last Friday’s close of RM1.69, while Masterskill has fallen 66.3% from its year-high of RM3.49 to RM1.18 last Friday.
Among the education stocks, SEGi stands as both OSK Research and RHB Research’s top picks.
“In the education business, size does matter. SEGi currently has a very diversified offering and is focusing on the middle-income group that forms a large population here. There is also room to grow its student number from 25,000 currently to its full capacity of 30,000,” he said.
SEGi saw its net profit grow 78% to RM36.25 million for 1HFY11 ended June, on the back of RM137.7 million in revenue. Its share price, however, has fallen 19.2% from a recent high of RM2.08 in July to RM1.68 last Friday.
“SEGi is still our pick for the sector, due to its good track record and resilience in riding out market uncertainties. SEGi deservedly trades at a premium to its peers at 12.8 times FY12 PER (HELP at 12.6 and Masterskill 8.8 times), supported by its superior compound annual growth rate of 26.3% (HELP 7.7% and Masterskill -19.6%).
We continue to believe that SEGi is best poised to deliver growth going forward,” said RHB Research.
Apart from SEGi, OSK Research is also upbeat on Bursa Malaysia newcomer Prestariang Bhd, which offers ICT certification and distribution of software licences.
“Prestariang has a very secure business model with a good response to its courses by both graduates and undergraduates. Other stocks are expected to see gradual earnings growth, but Prestariang is expected to see its earnings grow by more than 50% for FY11,” said Kong, who added the counter has an attractive low single-digit valuation.
Listed on July 27, Prestariang posted RM12.99 million in net profit and RM45.99 million revenue for 1HFY11 ended June 30. However, its stock has since fallen 25.6% from its IPO price of 90 sen to Friday’s close of 67 sen.
Prestariang currently has an order book of RM280 million, with projects until 2015. It also counts international players such as Microsoft, Oracle, IBM and Autodesk as partners.
Alexander Chia of RHB Research said in the midst of waning global market sentiment, investors are more inclined to invest in defensive stocks.
“With a global recession looking possible next year, defensive stocks are in favour. In addition, investors looking to bottom fish to benefit from a near-term market bounce, would likely gravitate to higher beta issues that have seen a sharp selldown,” he said.
He added that although there is long-term growth potential for the education sector, HELP is a rather illiquid stock, which does not make it attractive for investors given the bearish market environment.
Although education is a non-cyclical sector, the headwinds faced by some players have been a drag on their performance and it remains to be seen when these will blow over.
This article appeared in The Edge Financial Daily, Ocotber 17, 2011.
Last month, RHB Research downgraded the sector to “neutral” on fears of a weak market outlook.
“We are turning cautious on prospects for the education sector in the coming quarter given rising macroeconomic headwinds, illiquidity of the stock in the sector, the relative small market cap of education stocks, and high foreign ownership,” it said in the Sept 29 report.
It downgraded HELP and Masterskill to “underperform” from “outperform” and “market perform”, while maintaining an “outperform” call on SEG International Bhd (SEGi).
RHB Research said education stocks were driven by Economic Transformation Programme (ETP) news flow in the past, but now the excitement has begun to recede.
“Entry point-projects (EPP) involving SEGi, such as the establishment of the Early Childhood Care and Education (ECCE) hub and the SkillsMalaysia INVITE programme, are already underway, while the announcement of the gradual liberalisation of the education sector under the Strategic Reform Initiatives is already priced in,” it said.
The research house has cut its FY12 price-earnings ratio (PER) by one or two times for the sector as its previous valuations were “overly optimistic” given the bearish outlook.
The poor outlook for the sector may be evident from the poor showing in financial results for some companies.
For 3QFY11 ended July 31, HELP’s net profit dived 92% to RM245,000 compared with RM3.24 million a year earlier. Its revenue, however, was flattish at RM23.96 million compared with RM23.38 million a year ago. For the nine months to July 2011, HELP’s net profit fell 25% to RM9.48 million, despite a 2.3% increase in revenue to RM79.63 million.
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Adam Chan Eu-Khin, HELP director of corporate planning, said the drastic fall in profit was mainly due to a one-off RM5 million cost to relocate its HELP ICT College from Klang to Fraser Business Park in Kuala Lumpur.
“As a result, we had to delay enrolment for our new courses as well,” he said.
Analysts, however, have noted that HELP’s earnings would still be flattish on a year-on-year basis without the RM5 million relocation cost.
“The delay caused HELP to postpone enrolment and marketing campaigns for new courses for the January/March intakes this year, which were reflected mostly in the 2QFY11 numbers,” said InsiderAsia in a recent report. It added that with HELP’s promotion to university status, it had to increase its manpower costs.
HELP was elevated to full university status in September, joining the ranks of the country’s 26 private universities.
HELP also saw its intake in Vietnam postponed due to a quality test by the government earlier this year, and had to incur cost to transfer its twinning programmes from HELP University College to HELP Academy.
Despite these headwinds, HELP is optimistic for better days ahead.
“The Vietnamese government has given the green light and we now have 50 students. We are beginning to market and recruit more students and hope to enroll 200 students by end-2012,” said Chan. He added it will also begin marketing to recruit more students after the relocation of its facility to Fraser Business Park.
Chan noted that the weakening US dollar has caused many Chinese students to pursue their education directly in the US and UK instead of Malaysia, and this will be a continuing trend in the future.
He added that given the recent termination of the joint-venture (JV) with Asia Pacific Land Bhd (AP Land), HELP will postpone its expansion plans in China indefinitely.
OSK Research analyst Kong Heng Siong said the termination of the JV with AP Land is a blessing in disguise as HELP would then be able to focus on marketing and improving its operations in the local and Southeast Asia markets.
“If you look at HELP’s operations, it has a firmer presence in Southeast Asia than China. It should definitely focus on recruiting students in this market as Malaysia will become a very attractive destination for tertiary education for those who cannot afford to go to US and UK,” he said.
Kong said he is unperturbed with the RM5 million relocation cost and expenditure to hire new staff, as the “short-term pain” is necessary to secure long-term growth for the group.
“However, HELP is still a niche player and it needs to diversify its offering in order to be able to attract more students in the future. HELP is expanding now, but it needs to ensure that it has enough students to fill the capacity,” he said.
An analyst with InsiderAsia noted that SEGi had experienced a similar gestation period when it expanded in the past, and is confident HELP’s earnings growth will recover in the future.
He said SEGi took a long while to digest all its acquisitions, brands and products.
“It was only in early 2010 that investors really took notice of SEGi’s turnaround and the stock price surged,” he said.
Earlier in the decade, SEGi’s profitability was low. Between 2001 and 2005, it offered courses under different brand names, such as Prime and Systematic. In 2006, the company streamlined its operations and consolidated into six large branches, including its flagship campus in Kota Damansara and used a single “SEGi” brand name.
By 2008, the fruit of the exercise was reaped, as SEGi’s pre-tax profit soared to RM9.88 million from RM2.48 million in 2007. It rose further to RM14.61 million in 2009 and RM54.31 million in 2010.
While the opening of the Fraser Business Park branch this year and the new Subang 2 campus in 2013 could cause some volatility in HELP’s medium-term earnings, the analyst is optimistic it will set the foundation for stronger growth in the future. “HELP is investing for the future,” he said, adding that another avenue for growth is its planned diversification into the lucrative private secondary education segment.
Kong said there are few catalysts that would re-rate HELP at the moment but there could be a minor improvement in profit for 4Q, depending on student intake in September. He added that HELP could propose a capital exercise to raise funds to build its flagship campus at Subang 2, which would also make its shares more liquid. OSK Research has a fair value of RM1.99 for HELP.
As for Masterskill, Kong said the stock has been battered down due to late student intake and reduction of National Higher Education Fund (PTPTN) loan approvals. About 95% of Masterskill students depend on PTPTN for funding.
“Masterskill has also seen some new competition in the healthcare education business. Just like HELP, Masterskill will need to diversify its offering,” he said.
OSK Research has a “trading buy” call on Masterskill with fair value of RM1.91.
Masterskill now has to contend with a new competitor in the form of KPJ Healthcare Bhd, Malaysia’s largest private hospital operator.
In July, KPJ’s education subsidiary, KPJ International College of Nursing and Health Sciences (KPJIUC), attained university college status, giving it a boost in academic standing and the ability to grant its own degrees. KPJ plans to invest RM120 million to expand its Nilai campus and aims to see a student enrolment of 10,000 by 2015.
Datin Siti Sa’diah Sheikh Bakir, KPJ managing director, has said the institution aims to acquire the status of a full-fledged university by 2016.
KPJ has a large infrastructure of hospitals, doctors and nursing staff which can support its courses, provide its students on-the-job training and give them future employment opportunities.
While Masterskill has no hospitals, it may have better economies of scale, with a revenue base about 10 times higher and a student base seven times larger than KPJIUC’s.
HELP has lost 40.5% from its 52-week high of RM2.84 to last Friday’s close of RM1.69, while Masterskill has fallen 66.3% from its year-high of RM3.49 to RM1.18 last Friday.
Among the education stocks, SEGi stands as both OSK Research and RHB Research’s top picks.
“In the education business, size does matter. SEGi currently has a very diversified offering and is focusing on the middle-income group that forms a large population here. There is also room to grow its student number from 25,000 currently to its full capacity of 30,000,” he said.
SEGi saw its net profit grow 78% to RM36.25 million for 1HFY11 ended June, on the back of RM137.7 million in revenue. Its share price, however, has fallen 19.2% from a recent high of RM2.08 in July to RM1.68 last Friday.
“SEGi is still our pick for the sector, due to its good track record and resilience in riding out market uncertainties. SEGi deservedly trades at a premium to its peers at 12.8 times FY12 PER (HELP at 12.6 and Masterskill 8.8 times), supported by its superior compound annual growth rate of 26.3% (HELP 7.7% and Masterskill -19.6%).
We continue to believe that SEGi is best poised to deliver growth going forward,” said RHB Research.
Apart from SEGi, OSK Research is also upbeat on Bursa Malaysia newcomer Prestariang Bhd, which offers ICT certification and distribution of software licences.
“Prestariang has a very secure business model with a good response to its courses by both graduates and undergraduates. Other stocks are expected to see gradual earnings growth, but Prestariang is expected to see its earnings grow by more than 50% for FY11,” said Kong, who added the counter has an attractive low single-digit valuation.
Listed on July 27, Prestariang posted RM12.99 million in net profit and RM45.99 million revenue for 1HFY11 ended June 30. However, its stock has since fallen 25.6% from its IPO price of 90 sen to Friday’s close of 67 sen.
Prestariang currently has an order book of RM280 million, with projects until 2015. It also counts international players such as Microsoft, Oracle, IBM and Autodesk as partners.
Alexander Chia of RHB Research said in the midst of waning global market sentiment, investors are more inclined to invest in defensive stocks.
“With a global recession looking possible next year, defensive stocks are in favour. In addition, investors looking to bottom fish to benefit from a near-term market bounce, would likely gravitate to higher beta issues that have seen a sharp selldown,” he said.
He added that although there is long-term growth potential for the education sector, HELP is a rather illiquid stock, which does not make it attractive for investors given the bearish market environment.
Although education is a non-cyclical sector, the headwinds faced by some players have been a drag on their performance and it remains to be seen when these will blow over.
This article appeared in The Edge Financial Daily, Ocotber 17, 2011.
Public Bank third quarter net profit rises 14.8pc
KUALA LUMPUR: Public Bank Bhd's net profit for the third quarter ended September 30 increased 14.8 per cent to RM898.7 million, up from RM782.7 million a year ago.
This was driven by strong loans and deposits growth and stable asset quality, which resulted in higher net interest income and lower loan impairment charges, the bank said.
"The outlook of the Malaysian banking sector, in which the group largely operates in, continues to be stable and supportive of growth.
"We continue to see the group's business performance to be in line with expectations and on track in meeting the key business targets for 2011," Public Bank's founder and chairman Tan Sri Teh Hong Piow said in a statement yesterday.
Revenue for the same period increased by 13.7 per cent to RM3.27 billion from RM2.87 billion, while earnings per share were 25.66 sen, compared with 22.35 sen a year ago.
"The retail banking business is projected to grow at a moderate pace amid stiff competition and the introduction of regulatory measures to address rising household debt levels," Teh said.
For the nine months ended September 30, 2011, its net profit grew 18.4 per cent to RM2.6 billion from RM2.2 billion, while revenue rose 16.9 per cent to RM9.4 billion from RM8.1 billion previously.
"The Public Bank group's sound financial results are a validation of its effective organic growth strategies and sustainable business model.
"The group net return on equity of 26.7 per cent remains the highest among Malaysian banks."
The net profit growth and net return on equity were driven by strong revenue growth, continued disciplined cost management with low cost-to-income ratio of 30 per cent, and superior asset quality with improvement in credit charges by 15 per cent.
Public Bank reaffirmed its number one position in domestic lending for residential mortgages, commercial property financing and passenger vehicles financing.
Teh said the bank's balance sheet growth indicators remained healthy with gross loans at RM172.7 billion, up 13.8 per cent on an annualised basis.
Domestic loan growth, meanwhile, remained strong with an annualised growth rate of 14.1 per cent.
Total customer deposits grew by an annualised rate of 12.7 per cent to RM193.7 billion, while domestic customer deposits grew at a stronger annualised growth rate of 13.8 per cent.
"The outlook of the Malaysian banking sector, in which the group largely operates in, continues to be stable and supportive of growth.
"We continue to see the group's business performance to be in line with expectations and on track in meeting the key business targets for 2011," Public Bank's founder and chairman Tan Sri Teh Hong Piow said in a statement yesterday.
Revenue for the same period increased by 13.7 per cent to RM3.27 billion from RM2.87 billion, while earnings per share were 25.66 sen, compared with 22.35 sen a year ago.
For the nine months ended September 30, 2011, its net profit grew 18.4 per cent to RM2.6 billion from RM2.2 billion, while revenue rose 16.9 per cent to RM9.4 billion from RM8.1 billion previously.
"The Public Bank group's sound financial results are a validation of its effective organic growth strategies and sustainable business model.
"The group net return on equity of 26.7 per cent remains the highest among Malaysian banks."
The net profit growth and net return on equity were driven by strong revenue growth, continued disciplined cost management with low cost-to-income ratio of 30 per cent, and superior asset quality with improvement in credit charges by 15 per cent.
Public Bank reaffirmed its number one position in domestic lending for residential mortgages, commercial property financing and passenger vehicles financing.
Teh said the bank's balance sheet growth indicators remained healthy with gross loans at RM172.7 billion, up 13.8 per cent on an annualised basis.
Domestic loan growth, meanwhile, remained strong with an annualised growth rate of 14.1 per cent.
Total customer deposits grew by an annualised rate of 12.7 per cent to RM193.7 billion, while domestic customer deposits grew at a stronger annualised growth rate of 13.8 per cent.
Tuesday, October 11, 2011
China bubble concerns spread
Wednesday October 12, 2011
Developers and insurance companies rushing to invest in commercial property
BEIJING: Concerns over a bubble in China's residential property market are spreading to the commercial real-estate sector at a time when developers are upping their exposure, and the country's insurance industry is poised to invest huge sums into the space.
While commercial prices are steady and insurance companies are watching and waiting, residential property developers have increased investments in the office sector after Chinese government measures were instituted to cool home prices.
Shimao Property, Country Garden, China Resources Land and Poly have been increasing their investments in commercial property. Smaller developers such as SinoOcean Land and Gemdale are increasing commercial exposure, too.
Commercial real-estate investment in China will exceed one trillion yuan (US$157bil) this year, up from 740 billion yuan in 2010, as developers have shifted away from the housing market, the target of nearly two years of government measures to cool the sector.
The investment frenzy into commercial property has also been fuelled by expectations of a potentially huge demand from China's insurers, which won approval late last year to invest up to 10% of their assets in real estate, most of which was aimed at commercial properties.
Investmen frenzy: Workmen install a poster onto a wall surrounding a construction site showing an artist’s impression of the new business district of Binhai, on the outskirts of Tianjin in this March 2, 2011 file photo. A glut of commercial property is already plaguing cities such as Chengdu, Shenyang and Tianjin. — Reuters But even before any major investment from insurance companies, prices of office space and shopping malls have jumped and rental yields have slipped due to speculative buying, fuelling concerns of a bubble forming across the industry.
“The low investment yield does give us some concern that prices probably have gone up a lot and we need to see the income growth before we can see values going higher,” said Michael Klibaner, head of China research for property consultancy Jones Lang LaSalle.
Insurers, including China Life, Ping An, China Pacific and Goldman Sachs backed Taikang Life, have 500 billion yuan available to invest in property, based on the industry's total assets of about five trillion yuan.
That's enough to buy all top-grade office buildings in Beijing, Shanghai, Guangzhou and Shenzhen, analysts say.
But only a fraction of the 500 billion yuan has been invested so far, as insurers keep a tight grasp on their money, given the concerns surrounding the sector.
Annual gross rental yields on commercial properties in major cities such as Beijing and Shanghai have fallen to 46% from around 10% several years ago.
Commercial properties in major cities such as Beijing and Shanghai are now generating annual gross rental returns that are below China's official one-year lending rate of 6.56%. That means if investors borrow and plough that money into commercial property, they stand to lose because the returns won't even cover the borrowing cost.
Last month, China's banking regulator urged banks to strictly monitor risks when they provide loans to commercial property projects and set a higher criteria for approving such loans than for home mortgages.
The China Insurance Regulatory Commission (CIRC) currently requires insurers to submit all property transactions for its approval as it works on more detailed investment rules.
“The risk is a bit high if insurers invest in the real-estate market now. There are good reasons for CIRC to hold back the issuance of its final guidelines,” said Chen Hongxia, an analyst at Oriental Securities in Shanghai.
Faced with mounting pressure to meet their long-term liabilities amid a rapidly ageing population, insurers had spent years lobbying Beijing to lift the property investment ban.
Domestic investors are largely restricted from buying properties abroad due to China's closed capital account, forcing them to look for investment opportunities within the country.
Investment in commercial property is encouraged by China's vow to boost domestic consumption as part of its economic rebalancing.
Shirley Xiao, senior vice-president of top Chinese developer China Vanke, described the commercial property rush as irrational.
Many developers lacked the financial backing and human resources needed to run office properties and malls, and China's urbanisation was far from over, boding well for the residential sector over the long term, she said. “We don't think there is logic behind this.”
A glut of commercial property was already plaguing cities such as Chengdu, Shenyang and Tianjin, analysts said. - Reuters
Shopping malls are being built across the country, with some boasting floor areas of more than several hundred thousand sq m.
The rationale behind building more malls: China has much less retail space per capita than Europe and the United States. Retail space per capita in China is less than 0.5 sq m, compared with about one sq m in Europe and 23 sq m in the United States.
But some analysts say this comparison is misleading, given the sheer size of China's population.
In some major Chinese cities such as Beijing and Shanghai, retail space per capita is already nearing or surpassing the European and US levels.
Only large developers with easy access to bank credit and strong state parent backing, such as China Resources Land, would be successful in running large malls when there was a glut, analysts said.
It is more risky for smaller developers such as SinoOcean Land and Gemdale to expand aggressively in commercial property, which requires more expertise and is more capital intensive and time consuming.
And as more people shop online, it is getting increasingly challenging to run a shopping mall and make it appealing to merchants, consumers and investors.
“I think it will be a golden decade for the consumer Whether it will be a golden decade for developers remains to be seen,” said James Hawkey, executive director of retail services at Cushman & Wakefield in China. - Reuters
Developers and insurance companies rushing to invest in commercial property
BEIJING: Concerns over a bubble in China's residential property market are spreading to the commercial real-estate sector at a time when developers are upping their exposure, and the country's insurance industry is poised to invest huge sums into the space.
While commercial prices are steady and insurance companies are watching and waiting, residential property developers have increased investments in the office sector after Chinese government measures were instituted to cool home prices.
Shimao Property, Country Garden, China Resources Land and Poly have been increasing their investments in commercial property. Smaller developers such as SinoOcean Land and Gemdale are increasing commercial exposure, too.
Commercial real-estate investment in China will exceed one trillion yuan (US$157bil) this year, up from 740 billion yuan in 2010, as developers have shifted away from the housing market, the target of nearly two years of government measures to cool the sector.
The investment frenzy into commercial property has also been fuelled by expectations of a potentially huge demand from China's insurers, which won approval late last year to invest up to 10% of their assets in real estate, most of which was aimed at commercial properties.
Investmen frenzy: Workmen install a poster onto a wall surrounding a construction site showing an artist’s impression of the new business district of Binhai, on the outskirts of Tianjin in this March 2, 2011 file photo. A glut of commercial property is already plaguing cities such as Chengdu, Shenyang and Tianjin. — Reuters “The low investment yield does give us some concern that prices probably have gone up a lot and we need to see the income growth before we can see values going higher,” said Michael Klibaner, head of China research for property consultancy Jones Lang LaSalle.
Insurers, including China Life, Ping An, China Pacific and Goldman Sachs backed Taikang Life, have 500 billion yuan available to invest in property, based on the industry's total assets of about five trillion yuan.
That's enough to buy all top-grade office buildings in Beijing, Shanghai, Guangzhou and Shenzhen, analysts say.
But only a fraction of the 500 billion yuan has been invested so far, as insurers keep a tight grasp on their money, given the concerns surrounding the sector.
Annual gross rental yields on commercial properties in major cities such as Beijing and Shanghai have fallen to 46% from around 10% several years ago.
Commercial properties in major cities such as Beijing and Shanghai are now generating annual gross rental returns that are below China's official one-year lending rate of 6.56%. That means if investors borrow and plough that money into commercial property, they stand to lose because the returns won't even cover the borrowing cost.
Last month, China's banking regulator urged banks to strictly monitor risks when they provide loans to commercial property projects and set a higher criteria for approving such loans than for home mortgages.
The China Insurance Regulatory Commission (CIRC) currently requires insurers to submit all property transactions for its approval as it works on more detailed investment rules.
“The risk is a bit high if insurers invest in the real-estate market now. There are good reasons for CIRC to hold back the issuance of its final guidelines,” said Chen Hongxia, an analyst at Oriental Securities in Shanghai.
Faced with mounting pressure to meet their long-term liabilities amid a rapidly ageing population, insurers had spent years lobbying Beijing to lift the property investment ban.
Domestic investors are largely restricted from buying properties abroad due to China's closed capital account, forcing them to look for investment opportunities within the country.
Investment in commercial property is encouraged by China's vow to boost domestic consumption as part of its economic rebalancing.
Shirley Xiao, senior vice-president of top Chinese developer China Vanke, described the commercial property rush as irrational.
Many developers lacked the financial backing and human resources needed to run office properties and malls, and China's urbanisation was far from over, boding well for the residential sector over the long term, she said. “We don't think there is logic behind this.”
A glut of commercial property was already plaguing cities such as Chengdu, Shenyang and Tianjin, analysts said. - Reuters
Shopping malls are being built across the country, with some boasting floor areas of more than several hundred thousand sq m.
The rationale behind building more malls: China has much less retail space per capita than Europe and the United States. Retail space per capita in China is less than 0.5 sq m, compared with about one sq m in Europe and 23 sq m in the United States.
But some analysts say this comparison is misleading, given the sheer size of China's population.
In some major Chinese cities such as Beijing and Shanghai, retail space per capita is already nearing or surpassing the European and US levels.
Only large developers with easy access to bank credit and strong state parent backing, such as China Resources Land, would be successful in running large malls when there was a glut, analysts said.
It is more risky for smaller developers such as SinoOcean Land and Gemdale to expand aggressively in commercial property, which requires more expertise and is more capital intensive and time consuming.
And as more people shop online, it is getting increasingly challenging to run a shopping mall and make it appealing to merchants, consumers and investors.
“I think it will be a golden decade for the consumer Whether it will be a golden decade for developers remains to be seen,” said James Hawkey, executive director of retail services at Cushman & Wakefield in China. - Reuters
KNM gets US$200m contract in Sri Lanka from Octagon unit
| Written by Surin Murugiah of theedgemalaysia.com | ||
| Tuesday, 11 October 2011 19:19 |
KUALA LUMPUR: KNM GROUP BHD [] has landed a conditional US$200 million (RM638 million) contract to build a waste to energy plant in Sri Lanka from OCTAGON CONSOLIDATED BHD []’s subsidiary Orizon Renewable Energy (Private) Ltd (ORE).
It said on Tuesday, Oct 11 that its subsidiary KNM Process Systems Sdn Bhd had been awarded the contract to build the plant capacity to process up to 1,000 tons per day of municipal solid waste for generation of a minimum of 40 MW of gross electrical energy in Karadiyana, Thumbowila, Kesbewa, Colombo.
It said the conditional award was subject to among others, the signing of a definitive agreement, based on terms and conditions acceptable to the parties including the financiers of the project by December 2011.
KNM said the project, which involves the generation of renewable energy from municipal solid waste at the Project site covering up to 20 acres of land in Karadiyana, was to be implemented under Public Private Partnership between ORE and the Waste Management Authority of Western Province, an agency under the Government of Sri Lanka.
The company said the project was expected to contribute positively to its earnings for the financial years ending Dec 31, 2012, 2013 and 2014.
KNM Group: Peterborough project delayed
Date: 10/10/2011
 (Oct 10, RM1.20) Maintain underperform with fair value of 70 sen: Last week, KNM announced that it had been prompted by its client that the financial close of its UK Peterborough contract (worth RM2.2 billion) has been delayed to December. As such, the company believes it will be unable to meet its guided FY11 revenue of RM2.2 billion and earnings before interest, taxes, depreciation, and amortisation (Ebitda) earnings of RM270 million. The project involves the development of a biomass and waste recycling centre in the UK using high-end technology. KNM was awarded the engineering, procurement and construction (EPC) contract on Dec 21, 2010. We are not surprised by the announcement as we have noted that the project had yet to achieve financial close by August. The management had previously guided that it would likely be achieved in early 2HFY11. As such, we had postponed the project's earnings contribution to FY12 in our previous note (dated Aug 23, 2011). We reiterate our view that the stock will likely continue to report disappointing earnings. Moreover, it has significant exposure to Europe and the UK, which are at high risk of economic slowdown. As such, we foresee continual volatility in its forward earnings despite its order backlog of RM5.3 billion (of which half is made up of the Peterborough project). We estimate that the Peterborough contract accounts for around 80% of our core FY12 earnings per share (EPS). However, this is based on conservative assumptions that the company secures minimal new wins beyond the project within FY12 and Ebitda margins grow by one percentage point to 9.5% (from our 8.5% assumption for FY11). We maintain our FY11 to FY13 earnings estimates as we had already assumed: (i) the project would kick start in FY12; and (ii) lower than guided revenue and Ebitda earnings of RM1.98 billion and RM168.5 million respectively for FY11. However, we are removing our FY11 dividend per share assumption of two sen, as we believe the company is unlikely to pay a dividend under such difficult conditions. Upside risks to our view include: (i) better than expected margins for contracts executed in the latter part of FY11; and (ii) higher than expected contract wins moving ahead which will significantly increase revenue earnings. The stock has continued to negatively surprise the market, reinforcing our view that the stock deserves to trade at a discount to sector peers. We maintain our fair value of 70 sen per share based on nine times FY12 price earnings ratio. ' RHB Research, Oct 10 This article appeared in The Edge Financial Daily, Ocotber 11, 2011. | ||||||||||
Wednesday, October 5, 2011
Masterskill Education Group sees new substantial shareholder
Written by Joseph Chin of theedgemalaysia.com
Wednesday, 05 October 2011 21:15
KUALA LUMPUR: Masterskill Education Group Bhd (MEGB) reported that Siva Kumar s/o M. Jeyapalan has emerged as a substantial shareholder in the education group.
A filing showed he acquired 41.20 million shares or a 10.05% stake on Wednesday, Oct 5. The share price closed at RM1.09.
His emergence as a substantial shareholder could be linked to an acquisition undertaken by MEGB on March 21 when the MEGB acquired two companies -- Unihealth (M) Sdn Bhd (UMSB) and Unihealth Education Group Sdn Bhd (UEGSB) – for RM3 million cash.
The companies were acquired from Siva Kumar and Ching Koon Kah @ Chin Kon Kah.
UMSB had an authorised share capital of RM100,000 comprising 100,000 ordinary shares of RM1 each of which RM10.00 had been issued and fully paid-up. The intended principal activity of UMSB was to provide education and management of education; to establish, manage and operate nursing academy; and provision of basic and advance nursing training.
UEGSB had an authorised share capital of RM100,000 comprising 100,000 ordinary shares of RM1 each of which RM10 had been issued and paid-up. The intended principal activity of UEGSB was the provision of medical, clinical, health care services and nursing home.
MEGB had then said the rationale for the acquisition was in line with the expansion of MEGB group’s future expansion plan and to contribute to a more organised corporate structure of the group.
Wednesday, 05 October 2011 21:15
KUALA LUMPUR: Masterskill Education Group Bhd (MEGB) reported that Siva Kumar s/o M. Jeyapalan has emerged as a substantial shareholder in the education group.
A filing showed he acquired 41.20 million shares or a 10.05% stake on Wednesday, Oct 5. The share price closed at RM1.09.
His emergence as a substantial shareholder could be linked to an acquisition undertaken by MEGB on March 21 when the MEGB acquired two companies -- Unihealth (M) Sdn Bhd (UMSB) and Unihealth Education Group Sdn Bhd (UEGSB) – for RM3 million cash.
The companies were acquired from Siva Kumar and Ching Koon Kah @ Chin Kon Kah.
UMSB had an authorised share capital of RM100,000 comprising 100,000 ordinary shares of RM1 each of which RM10.00 had been issued and fully paid-up. The intended principal activity of UMSB was to provide education and management of education; to establish, manage and operate nursing academy; and provision of basic and advance nursing training.
UEGSB had an authorised share capital of RM100,000 comprising 100,000 ordinary shares of RM1 each of which RM10 had been issued and paid-up. The intended principal activity of UEGSB was the provision of medical, clinical, health care services and nursing home.
MEGB had then said the rationale for the acquisition was in line with the expansion of MEGB group’s future expansion plan and to contribute to a more organised corporate structure of the group.
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