BWFE 3013 REAL ESTATE MANAGEMENT Table of Contents 1.0 INTRODUCTION..................................................... 1 2.0 BACKGROUND....................................................... 3 2.1 MAIN STRATEGIC..................................................3 2.2 FIVE FLAGSHIP ZONES IN ISKANDAR MALAYSIA........................6 2.3 INFRASTRUCTURE IN ISKANDAR MALAYSIA............................10 3.0 ECONOMIC PERSPECTIVE............................................ 12 3.1 ISKANDAR - A GROWTH-CATALYTIC CORRIDOR.........................12 3.2 ISKANDAR A CONTRIBUTION TO JOHOR AND MALAYSIA..................12 3.3 CATALYTIC INFRASTRUCTURE AND INVESTMENT ON TRACK...............14 3.4 BROAD-BASED AND STRATEGIC INVESTMENT...........................16 3.5 INVESTMENT IS PREDOMINANTLY DOMESTIC INVESTOR-LED..............18 3.6 JOHOR-MALAYSIA-SINGAPORE CONNECTIVITY..........................20 3.7 CONVINCING BUY-INS FROM SINGAPOREAN INVESTORS..................20 4.0 PROPERTY PERSPECTIVE............................................ 22 4.1 JOHOR COMING BACK TO LIFE?.....................................22 4.2 LOTS OF PLAYERS................................................24 4.3 UEM LAND THE BEST PROXY........................................25 4.4 OTHER DEVELOPERS UNDER OUR COVERAGE............................33 5.0 PLANTATION PERSPECTIVE.......................................... 39 5.1 JOHOR IS THE LARGEST PALM OIL-GROWING STATE IN PENINSULAR MALAYSIA...........................................................39 5.2 MALAYSIAN PLANTERS TURNED PROPERTY DEVELOPERS..................39 5.3 THE KEY IOI CORP PROPERTY PROJECTS IN JOHOR....................40 5.4 EXPECT HIGHER SALES FROM ITS JOHOR PROJECTS....................41 6.0 CONSTRUCTION PERSPECTIVE........................................43 6.1 BASIC INFRASTRUCTURE HAS TAKEN SHAPE...........................43
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BWFE 3013 REAL ESTATE MANAGEMENT
Table of Contents1.0 INTRODUCTION.....................................................................................................................1
The sharp rise in land and property values in the Klang Valley in the mid-90s spurred
many plantation companies to expand into property development to unlock the value of their
land banks. This has led some to view plantation companies as an alternative play to the property
sector in the mid-90s during the property boom. The Malaysian planters quickly moved up the
ranks in this space, and have today emerged among the largest and most profitable property
developers in Malaysia. Some have also since spread their wings beyond Malaysian shores to
Singapore, UK, China and Australia.
5.3 THE KEY IOI CORP PROPERTY PROJECTS IN JOHORBandar Putra, Kulai is the largest of the three development projects in the Iskandar
region. Bandar Putra covers approximately 6,000 acres of freehold land and is a fully
comprehensive regional township located within the boundary of the Senai-Kulai Township. The
projected gross development value (GDV) for this project is around RM8.7bn and the group has
developed around 67% of the land area converted for development of about 2,299 ha (5,680
acres).In 2012, this project accounted for 29% of its total units sold and 19% of its total sales
values. Taman Lagenda Putra, a 91 ha (225 acres) development, is located next to Kulaijaya toll
gate and Jalan Kulaijaya-Pekan Nanas/Pontian Road. It is close to Second Link Expressway and
North-South Highway. The project is just a short distance away from Senai International Airport
while Johor Bahru city centre is 35 minutes away via Skudai Highway/North-South Highway. It
is also located next to the proposed Kulaijaya-Senai Bypass. This is the smallest of the three
projects that are located in the Iskandar region. This project makes up 10% of the total units sold
by the group and 4% of total sales value.
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Figure 33: Location of Bandar Putra, Kulai
The group's second largest and newest township project in Iskandar, Johor is Taman
Kempas Utama. Launched in 2007, the project covers 119 ha (294 acres) and has a gross
development value of RM2.5bn. This project is located next to Kempas Toll and opposite
Starhill Golf and Country Club and is 15 mins away from Johor City Centre. It has also
designated as an integrated public transportation hub for Iskandar Malaysia, which means the
proposed Rail Transit System and High Speed Rail System linking Malaysia and Singapore will
be located close to the township. This project contributes around 6% of the group's property sales
value and 5% of units sold. Other on-going projects by the group in Johor include the Bandar
Putra Segamat, a 6,000 acre township development in Segamat, and The Platino, a serviced
apartment project located next to the Skudai highway.
5.4 EXPECT HIGHER SALES FROM ITS JOHOR PROJECTS
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The opening of JPO has also helped boost sales for the group's project in Indahpura. The
group has in recent years sold several pieces of industrial land in its project for RM18-24 per sq.
ft. which has helped boost its property earnings. We expect the addition of JPO and the rising
appeal of Iskandar to enhance the group's property and land bank values over time. Our tracking
of the group's property sales in Johor revealed a sharp surge in property contribution from Johor
in 2011. We also find Johor to be the key contributor to the group's property sales, making up
99% of total sales in FY11.
Figure 34: Property sales in Johor by Genting Plantations
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6.0 CONSTRUCTION PERSPECTIVE
6.1 BASIC INFRASTRUCTURE HAS TAKEN SHAPESince Iskandar’s inception in 2006, basic infrastructure within Iskandar and access roads
from the fringes of Iskandar has almost been completed. Construction in the last five years
focused on developments within Nusajaya, covering earthwork, access roads and the
construction of several catalytic developments, such as universities and the LegoLand Theme
Park. The largest earthwork package in Medini was worth RM767m, awarded to WCT in 2009.
Sunway, on the other hand, secured three jobs for LegoLand (RM248m), Pinewood Studios (RM
309) and the LegoLand Water Theme Park (RM45m) between 2011 and 2013.
Figure 35: Major awards in Iskandar to listed contractors since 2007
6.2 TRANSPORT INFRASTRUCTURE TO SHIFT TO RAIL WORKHighways, the upgrading of major road networks and building of new ones had been
completed between 2010 and 2012, mainly awarded to private companies. The main project was
the RM945m Coastal Highway. This is a 6-lane, toll-free highway that links Nusajaya and Johor
Bahru city (at Danga Bay) and was completed and officially opened to the public in 2Q12. The
15 km stretch cuts the existing 30-minute ride to the Johor Bahru city centre to 15 minutes while
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dispersing traffic congestion by 30%. Over the next 5-6 years, we expect infrastructure
construction in Iskandar to shift to its rail transport system.
Figure 36: Major Road and highway projects within and around Iskandar
Figure 37: Coastal highway alignment
6.3 CONTRACTORS WITH BIGGEST PROPERTY EXPOSURE TO ISKANDAR
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Contractors under our coverage also have property exposure to Iskandar. But the ones
with larger exposure are WCT, Sunway and Gamuda. WCT has a total of 46 acres (4% of group
land bank) of landbank in Johor, of which 34 acres are located in Medini. The three land parcels
in Medini has a total outstanding GDV of RM2.8bn, comprising high-rise homes and mixed
commercial developments. This accounts for 19% of its total group outstanding GDV. Sunway
owns 1,858 acres in Iskandar or 48% of its total land bank. Total estimated GDV is RM30bn
over 12-17 years and will feature a township development similar to its integrated development
in Bandar Sunway. As for Gamuda, it owns a 50% share of Horizon Hills in Nusajaya with UEM
Land. Its total remaining GDV here is RM4.8bn (55% of its domestic GDV) with unsold land of
710 acres or 69% of its total unsold land domestically.
6.4 SPILLOVER FOR BUILDING-MATERIALS SECTORThe building-materials sector, particularly cement and steel, should also benefit from the
spillover of projects in Iskandar. Demand for steel should be underpinned by the HSR and RTS
as steel typically accounts for about 40% of the input for rail projects. Where cement is
concerned, we expect 4-5% demand growth in 2013 from ongoing property-development
projects in Iskandar. Major building-materials suppliers under our coverage that will likely
benefit are Lafarge (dominant market share), Tasek and Ann Joo.
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7.0 ADVANTAGE INVESTING IN ISKANDAR MALAYSIAIskandar Malaysia was designed with investor’s desire. The region will enjoy Tip-top facilities,
full infrastructure and a one-stop Business Centre to ensure business transactions are fast,
seamless and convenient. Moreover, Iskandar Malaysia is will become Southern Peninsular
Malaysia's most developed region, where living, entertainment, environment and business
seamlessly converge within a bustling and vibrant metropolis. Furthermore, Iskandar Malaysia
has been allocated RM6.83 billion by the Government. Encompassing a vast acreage of land, it is
the largest single development project ever to be undertaken in the region. The advantage of
investing in Iskandar Malaysia as a list of following:
7.1 LOCATION BENEFITOne of the magnitudes advantage investing in Iskandar Malaysia is location where the southern
gateway to Peninsular Malaysia, its advantages include:
Six to eight hours flight radius from Asia's burgeoning growth centre such as Bangalore,
Dubai, Hong Kong, Seoul, Shanghai, Taipei and Tokyo (Connecting Asia Region).
Within reach of a global market of some 800 million people (Global Market).
Located at the crossroads of the East-West trade routes (Trade Benefit).
Accessible by Air, Land or Sea from the rest of Asia (Transportation Benefit).
Almost 3 times the size of Singapore, with vast land banks primed with ready
transportation and telecommunications infrastructure (Facilitate Operating).
Enjoys the same standards of living at a much lower cost of living than Singapore, Hong
Kong, Taiwan, Japan or Korea (Better Living State).
Populated with a multi-lingual, educated workforce from within Johor and the rest of
Malaysia (Great Human Capitalization).
Because of its strategic location, accessibility to leading Asian cities, proximity to some of the
world's most rapidly growing and important economies, and a range of attractive fiscal
incentives, Iskandar Malaysia is poised to attract an exciting influx of foreign and high-level
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corporate investments as discerning investors look to benefit from its many advantages and high
growth potential.
By having location benefit in order to facilitate the business environments in the region,
Malaysia is one of the best places to invest in. Taking into account its competitive wages, low
inflation, high staff retention rate, a well-educated and multilingual workforce along with world-
class infrastructure, it makes perfect economic sense to invest in a country that is as sound and
stable as Malaysia.
7.2 ECONOMIC COMPETENCE & CONTINUOUS ECONOMIC GROWTHMalaysia is a country on the go and dubbed the "lucky country" because of its wealth of mineral
resources and fertile soils, Malaysia did not rest on its laurels but took decisive steps to progress
from an economy dependent on agriculture and primary commodities in the sixties to a
manufacturing-based, export-driven economy spurred on by high technology, knowledge-based
and capital-intensive industries. The structural transformation of Malaysia's economy over the
last 40 years has been spectacular.
Moreover, Malaysia's pragmatic and flexible management approach has enabled the economy to
raise its competitiveness and dynamic competences enhance its resilience in facing challenging
circumstances. Deliberate measure has been taken to make the economy more diversified and
broad-based to ensure sustainable growth. Continuous efforts have been pursued to enhance the
services sector, accelerate value-added of the manufacturing sector as well as boost the
agriculture and agro-based sector as the third engine of growth. New sources of growth continue
to be promoted and developed such as biotechnology, information and communications
technology, halal products and Islamic finance. Indeed Malaysia is developing as a knowledge-
based economy, driven by human capital, innovation and ideas.
7.3 GOVERNMENT SUPPORTIVE & POLICIESGovernment policies that maintain a business environment with opportunities for on the growth
and profits have made Malaysia an attractive manufacturing and export base in the region. The
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private sector in Malaysia has become partners with the public sector in achieving the nation's
development objectives.
Firstly, one of the factors that have attracted investors to Malaysia is the government's
commitment to maintain a business environment that provides companies with the opportunities
for growth and profits. This commitment is seen in the government's constant efforts to obtain
feedback from the business community through channels of consultation such as regular
government-private sector dialogues. These allow the various business communities to air their
views and to contribute towards the formulation of government policies which concern them.
Secondly, liberal equity policy that provides foreign investors in Malaysia's manufacturing sector
can hold 100% equity in projects which export at least 80% of their production. However,
effective from 17 June 2003, 100% foreign equity holding is allowed for all investments in new
projects, as well as investments in expansion/diversification projects by existing companies
irrespective of their level of exports.
Thirdly, attractive tax incentives that have attracted investors to Malaysia invest which
Malaysia's company tax rate is attractive at 27% and is applicable to both resident and non-
resident companies. Malaysia also offers a wide range of tax incentives for manufacturing
projects under the Promotion of Investments Act 1986 and the Income Tax Act 1967. The main
incentives are the Pioneer Status, Investment Tax Allowance, Reinvestment Allowance,
Incentives for High Technology Industries and Incentives for Strategic Projects and Incentives
for the Setting-up of International/ Regional Service-based Operations.
7.4 EDUCATED & COMPETENCE HUMAN CAPITALIZATIONMalaysia offers investors a young, educated and productive workforce at costs competitive with
other countries in Asia. Backed by the government's continued support of human resource
development in all sectors, the quality of Malaysia's workforce is one of the best in the region.
Literacy levels are high at more than 94% and labor productivity has grown steadily at more than
3.3% per annum over the last few years surpassing that of many developed countries.
Other than that, foreign companies in the manufacturing sector are allowed to employ expatriates
where certain skills are not available in Malaysia.
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7.5 EFFICIENCY TRANSPORTATION FACILITIESFirstly, a great efficiency network and well-maintained highway in Peninsular is a boon for all
level users, especially for industries. These highways link major growth centres to seaports and
airports throughout the peninsula and provide an efficient means of transportation for goods.
Secondly, a great efficiency seaport of International used also is a boon for all level users,
especially for international trade such as seaborne trade, has traditionally been the lifeblood of
Malaysia. Today, 95% of the country's trade is by sea via Malaysia's seven international ports -
Penang Port, Port Klang, Johor Port, Port of Tanjung Pelepas, Kuantan Port and Kemaman Port
in Peninsular Malaysia and Bintulu Port in Sarawak. Hong Kong-based Cargonews Asia placed
Port Klang and Port of Tanjung Pelepas among Asia's top ten best seaports and top ten best
container terminal operators.
Thirdly, a well-functioning international airport also is a boon for all level users. Malaysia's
central location in the Asia Pacific region makes her an ideal gateway to Asia. Air cargo
facilities are well-developed in the five international airports - the Kuala Lumpur International
Airport (KLIA), Penang International Airport and Langkawi International Airport in Peninsular
Malaysia, Kota Kinabalu International Airport in Sabah, and Kuching International Airport in
Sarawak. Malaysia's biggest airport, the KLIA, located 50 kilometers south of Malaysia's federal
capital of Kuala Lumpur, has an initial capacity of 25 million passengers and 650,000 tons of
cargo per year. Cargo import and export procedures are fully automated at the KLIA to cut down
delivery time. Within a short span of two years since its opening, the KLIA was ranked number
one for overall business passenger satisfaction in an International Air Transport Association
(AITA) survey.
7.6 HIGH-TECH TELECOMMUNICATIONS FACILITIESMalaysia's telecommunications network has seen impressive expansion and upgrading during the
past decade following the successful privatization of its Telecommunications Department. The
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Other than that, a few week ago that the fastest network which is 4G LTE technology have been
using to provide highest speed and quality telecommunication services at reasonable price widely
all over Malaysia. With all of these telecommunications facilities are able to facilitate the
business operating & great living lifestyle.
7.7 A SOUND FINANCIAL FACILITIESA well-developed financial and banking sector has enhanced Malaysia's position as a dynamic
export base in Asia. Sophisticated financial facilities are available through domestic and foreign
commercial banks and their nationwide network of branches. There are also representative
offices of several foreign banks that wish to establish a presence in the region.
Besides the commercial banks, merchant banks, finance companies and industrial finance
institutions are major sources of credit to the industrial sector in Malaysia. Exporters in Malaysia
can also take advantage of the credit facilities offered by the Export-Import Bank of Malaysia
Berhad (Exim Bank), while another institution, Malaysia Export Credit Insurance Berhad
(MECIB), offers export insurance cover and guarantees.
To complement Malaysia's financial system, the government has established an International
Offshore Financial Centre (IOFC) on the island of Labuan located off the north-west coast of
Borneo. Companies in Labuan enjoy minimal taxes as well as confidentiality. To-date, more than
2,700 offshore companies have started their operations in Labuan. These include offshore banks,
trust companies, and insurance and insurance related companies. The Labuan Offshore Financial
Services Authority (LOFSA) is the agency which promotes and develops Labuan as an IOFC.
7.8 A WISELY SELECTION OF JOINT-VENTURE PARTNERS IN MALAYSIAMost large Malaysian companies have been involved in trade and industry for generations, and
many have excelled in international and regional markets. Thus, foreign investors seeking joint-
venture partners in Malaysia will be able to select from a wide range of companies to find one
that matches their needs. MIDA also assists foreign investors in business matchmaking to start
joint-venture projects or to undertake contract manufacturing
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7.9 A SOUND & VIBRANT BUSINESS ENVIRONMENTMalaysia's market-oriented economy, supportive government policies and a large local business
community that is ready to do business with international corporations have made Malaysia a
highly competitive manufacturing and export base.
In addition, Malaysia's rapid move towards the k-economy allows companies to do business in
an environment that is geared towards information technology.
One of Malaysia's major pull factors is its large pool of young, educated and trainable workforce.
Many of Malaysia's university graduates are trained overseas in fields such as engineering, and
accountancy, allowing them to adapt easily to an international corporate environment.
English is widely used in Malaysia, especially in business thus facilitating the investor's
communication with local personnel and suppliers. The country's legal and accounting practices
derived from the British system are familiar to most international companies.
In short, the advantages of investing in Iskandar Malaysia not only discuss above and it is more
and more it makes perfect economic sense to invest in a country that is as sound and stable as
malaysia. Thus, having more and more advantages of investing in Iskandar Malaysia discuss just
now is an overview of competences to achieve the investor objectives. Moreover, Malaysia is
one of the best places to invest in with the advantages of location benefit, economic competence