Tuesday, May 26, 2009

M'sian Resources plans RM1.8b office projects

(KUALA LUMPUR) Malaysian Resources Corp, developer of the nation's biggest transport hub, will build two office projects valued at RM1.8 billion (S$746 million), gauging that property markets will revive as the global recession eases.

Malaysia's biggest office supplier expects to sign up a foreign oil company to anchor the RM1 billion tower at the 348 Sentral project in Kuala Lumpur by taking up as much as 60 per cent of the building's office space, Malaysian Resources managing director Shahril Ridza Ridzuan said in an interview. The project also includes serviced apartments.

'The global recession is not going to last forever,' Mr Shahril said on May 22. 'It's a good time to start building now. Materials prices are at a fairly low ebb of the cycle.'

The company, whose shares surged 91 per cent since Jan 1, plans to return to profit this year and expects to expand its order book by 50 per cent to RM3 billion as a government stimulus package spurs domestic demand.

The two office projects in Kuala Lumpur Sentral, an urban centre built around Malaysia's largest bus and rail hub, will generate an average of RM600 million a year from 2010, based on the project's total expected revenue.

Shares of Malaysian Resources, controlled by the country's biggest pension fund, rose 5.4 per cent to a 12-month high of RM1.36 at 12.14pm. The company is the third-biggest climber on the Kuala Lumpur Construction Index this year and has outpaced the benchmark Composite Index's 20 per cent gain.

The 348 Sentral development covers 1.1 million square feet of office space. The second project, worth RM800 million, is about half the size. Kuala Lumpur Sentral is already home to the Hilton and Le Meridien hotels. A St Regis hotel is also planned for the area.

'Once we have our office deals signed up, then that seals our pipeline for the next three years in terms of revenue and profits,' Mr Shahril said. 'When you are willing to take the view that we're going to come out of this, a three-year time frame is well within striking distance of putting your office on the market.'

Loans approved for buying Malaysian residential property surged 49 per cent in March from a month earlier, the second monthly gain, according to central bank data, adding to signs the industry may be rebounding.

'The worst is over' for the company, said Norfauzi Nasron, an analyst at OSK Research Sdn. While there are some 'concerns about incoming office supply, the Kuala Lumpur Sentral development is very strategic'.

Malaysia Resources expects to win RM1 billion of new orders this year, with 30 per cent of that coming from projects to clean up the country's rivers, Mr Shahril said. The company won two building contracts valued at RM239 million over the past two months, its first construction jobs secured this year, increasing its order book to RM2 billion, Mr Shahril said.

One of the projects includes upgrading road networks in Kuala Lumpur Sentral, funded through the government's stimulus package, he said. The government has unveiled RM67 billion of planned spending to help revive economic growth.

'We've definitely turned a corner from the fourth quarter last year,' he said. 'The rest of the quarter will show business strength.'

The construction division is leading the turnaround for Malaysian Resources, after surging building material prices and the economic slowdown pushed the company to losses in 2008.

On May 6, RHB Research Institute Sdn raised its profit forecast for Malaysian Resources by 34 per cent for 2010 and 36 per cent for 2011 to reflect higher construction earnings.

Malaysian Resources reported a RM39.3 million loss in the fourth quarter of last year as sales slid and building materials including steel surged. -- Bloomberg

Source: Business Times, 26 May 2009

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