IJM Land: continuously meeting high expectations

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KUALA LUMPUR: For IJM Land Bhd CEO and managing director Datuk Soam Heng Choon, the tough part in leading a company with annual revenue of over RM1 billion is in continuously meeting stakeholders’ high expectations.

These stakeholders include buyers of IJM Land properties and the investment fraternity, both of which have high regard for the company, which is the property arm of construction giant IJM Corp Bhd.

Indeed, with a still uncertain global economy, achieving new property sales growth year after year is a challenge, though Soam remains optimistic that IJM Land is on track to fulfil its commitments to deliver value to customers and shareholders.

As he puts it, building a strong business foundation which will further create value for customers and spur new property sales is paramount in the company’s agenda.

Of interest to its customers and shareholders lately is IJM Land’s joint venture (JV) in the UK that has opened a new chapter for the developer.

While the company already has development projects in Australia, Singapore, China and Vietnam, it has for the first time ventured “so far west” into the UK to diversify geographically and grow its revenue base.

The proposed estimated £280 million (RM1.38 billion) mixed development on a 1ha site in Royal Mint Street in London will comprise hotel and residential components. Based on IJM Land’s 51% share in the JV company, its portion of the working capital requirement for the project may come up to £30 million, according to the company.

“It is the first time we are going so far west, and we expect to be in the market in the next 12 months,” Soam said.

Soam has a three-year plan

for IJM Land on the drawing

board.

Focus still on Malaysia

But Malaysia is still the primary focus to grow IJM Land’s property sales. Soam, being mindful of the challenges in the real estate sector, said the developer is confident of achieving new property sales growth in the current financial year ending March 31, 2013 (FY13), as it rolls out new products.

Soam said IJM Land has achieved RM1.4 billion worth of new property sales in FY12, and FY13 figures are expected to surpass the previous year’s. He did not specify a forecast for FY13, only indicating that IJM Land had raked in some RM650 million worth of sales in the first five months of the financial year.

Soam has a three-year plan for IJM Land on the drawing board. During the period, he said IJM Land’s focus will be on three real estate projects in Malaysia with a combined gross development value (GDV) of some RM20 billion.

These projects are the RM11 billion Bandar Rimbayu near Kota Kemuning in the Klang Valley, the Light Waterfront, with a GDV of RM6 billion in Penang, and Sebana Cove with a GDV of RM3 billion in Johor.

IJM Land also announced last month it is embarking on a JV with Amona Development Sdn Bhd as well, to undertake a planned mixed project on a 23.4ha leasehold tract in Kerinchi and Pantai Dalam near Mid Valley Megamall.

RHB Research Institute said the project has an estimated GDV of RM2 billion. All these projects are considered crucial to sustain IJM Land’s earnings against weaker macro prospects.

In Malaysia, IJM Land has indicated that government measures to curb household debt and speculation in the property sector will result in slower growth prospects for the industry in the near term.

The company’s top line in the first quarter (1Q) ended June 30 was flat, although net profit rose due to the recognition of gains from the disposal of Menara IJM Land, according to notes accompanying its latest quarterly results.

In the quarter under review, IJM Land’s net profit increased 25% to RM51.12 million from RM40.76 million a year earlier, and revenue decreased marginally to RM251.23 million from RM252.35 million.

The cash-rich developer had net cash of RM261.68 million as at June 30, based on its cash pile of RM685.11 million and borrowings of RM423.43 million, according to its latest balance sheet.

Its latest reported net assets per share stood at RM1.74. This compares to RHB Research’s revised net asset value (RNAV) of RM3.40 for IJM Land after including the estimated GDV of RM2 billion from the developer’s mixed project in Kerinchi and Pantai Dalam.

Over the last six months, IJM Land shares, which traded at an intraday high of RM2.72 on July 19, sank to a low of RM1.99 on Sept 26, according to Bloomberg data. The stock had since recovered some lost ground to RM2.09 as at last Friday for a market capitalisation of RM2.89 billion.

The investment fraternity sees value in IJM Land. RHB Research analyst Loong Kok Wen is still optimistic over the developer’s fundamentals despite the volatility in its share price in recent months. These fundamentals, according to Loong, indicate IJM Land’s potential as a proxy to the Malaysian property market.

“We think IJM Land best represents the Malaysia property market, as the risk profile of S P Setia [Bhd] has substantially changed following its giant step into a new market in London. We continue to like IJM Land,” the analyst wrote in her latest note on IJM Land dated Sept 12.

RHB Research, which has an “outperform” call on IJM Land raised its fair value for the stock to RM2.89 from RM2.80 based on a higher RNAV for the developer.

Heading a company with annual revenue of over RM1 billion is certainly no easy task, but Soam takes it in his stride as the seasoned property executive capitalises on his experience to brand and position IJM Land as a market leader. He said this will require the developer to be customer-centric in order to roll out market-driven products and deliver quality and innovative offerings on time.

That is a crucial hallmark of a company which is a member of the prestigious The Edge Billion Ringgit Club.

While IJM Land’s market capitalisation will be closely watched, Soam does not want the company to be benchmarked solely against its market value as it is subject to volatile market forces.

“You can’t control share prices,” Soam said.

 

This article first appeared in The Edge Financial Daily, on Oct 9, 2012.

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