IOI's Strategic Shuffling Of Results

IOI Corp Bhd posted a 93.8% drop in net profit to RM37.36mil in the third quarter of its financial year ending June 30, compared with RM601.64mil in the corresponding period last year. The decline was mainly due to unrealised forex losses and lower contribution from its manufacturing and property business.

The company’s revenue dropped 12.2% to RM3.096bil in the third quarter compared with RM3.525bil a year earlier. Earnings per share was 0.63 sen versus 9.89 sen previously. The company declared a dividend of three sen for the quarter. IOI Corp said overall, the group’s results for the current financial year were expected to be lower than the previous year’s record but still satisfactory in the light of current conditions.

In a filing with Bursa Malaysia yesterday, the company said its plantation segment reported a 6% increase in operating profit to RM1.38bil for the nine months of the current financial year, compared with RM1.3bil in the same period a year ago. “The better performance is due mainly to higher CPO prices realised from the forward sales entered into during the second half of financial year 2008,” the company said. Its resource-based manufacturing operating profit was significantly lower at RM169.1mil for the nine months of the current financial year compared with RM457.4mil in the same period last year.

“The lower profit is attributable mainly to realised foreign exchange losses and customer defaults on high priced contracts incurred during the first half of the financial year and lower sales volume due to the unfavourable global economic conditions,” the company said. The property segment’s operating profit of RM200.5mil for the nine months of the current financial year was 35% lower than in the same period last year. It added that the decrease was mainly due to the soft property market conditions and lower margins.

Overview - The principal activities of IOICORP consist of investment holding and the cultivation of oil palm and processing of palm oil. The principal activities of the subsidiaries are cultivation of oil palm, processing of palm oil, trading in commodities, property development, property investment and investment holding.

Oil palm plantation is one of IOICORP's core businesses as it contributes over 40% to the company's profit. IOICORP manages about 100,000 ha of oil palm plantation with approximately 65% of the plantation in Sabah and the rest in the peninsular.

The company also owns ten crude palm oil mills to produce crude palm oil and palm kennel. Through its 65% owned subsidiary, IOI Properties Berhad, IOICORP is involved in property development and investment, which is another major profit contributor to the company. The company has undertaken several mixed development township projects, which include Bandar Puchong Jaya and Bandar Puteri Puchong in the Klang Valley and Bandar Putra Senai in Johor Bahru. In addition, IOICORP owns 1.7mn sq ft of lettable retail and office space. Meanwhile, the company is also involved in the manufacture and trading of fatty acids, glycerine, soap noodles and metallic stearates through its 59% owned subsidiary Palmco Holdings Berhad.

Ratings Downgrade - Moody's Investors Service has changed IOI Corporation Bhd's outlook to negative from stable for its Baa1 issuer rating. At the same time, the outlook for the Baa1 senior unsecured bonds and loans issued by IOI Ventures (L) Bhd, which are guaranteed by IOI, have been revised to negative from stable. "The rating action has been driven by IOI's recently reported weaker profitability which is mainly the result of higher than expected foreign exchange losses and customer defaults amid declining crude palm oil prices," said a Moody's Vice President.

"These losses have prompted Moody's concerns over weakness in the company's internal management system especially in effectively controlling its foreign exchange exposure. In addition, the outlook for IOI's two major business lines --- resource based manufacturing and real estate development -- are expected to remain challenging over the next 12 months which may continue to pressure its profitability," he said.

IOI's current ratings are supported by the favourable long-term outlook for palm oil demand; position as a global top-tier palm oil producer and efficient operations; good access to capital and bank markets as well as the management's good track record in managing the palm oil business throughout the business cycle. IOI's strong liquidity is also supportive of its current rating.

Downgrade pressure on IOI could emerge if pressure on its downstream operation margin continues resulting in protracted weakness in profitability, such that earnings before interest, tax, depreciation and amortisation (EBITDA) margin remains below 19 percent; and weaker palm oil production from some of its aging plantations results in a material reduction in the profitability of its plantation segment, Moody's said.

The outlook could return to stable if IOI can demonstrate effective internal measures to minimize its foreign exchange risks and bad debt losses, as well as generate positive free cash flow to reduce its debt leverage such that its Debt/EBITDA is not exceeding 2.5-2.75 times. The last rating action with regard to IOI was taken on Dec 2, 2008, when the company's issuer and debt ratings were downgraded from A3 to Baa1.

Verdict: No big deal. The stock is still some 40% off its 12 month high. Its a good sign that they are whacking all the losses onto this quarter. This will get rid of all the bad news in one shot. Expect a good showing in the coming quarters. Operations wise the company has already sold forward 80% of its FY09 CPO production at an average price of RM2,700 (till June 2009). Now they are selling FY2010 production but the company seems to think that there is a good chance that they can get RM3,000 in 2H of 2009. Operating cost is still just RM1,100 and may actually average closer to RM1,000 for the rest of the year. This represents a good pick up level.

Source

Raw deal for IOI Prop’s minority shareholders

Analysts believe they deserve better offer

PETALING JAYA: There is little doubt about IOI Corp Bhd’s Tan Sri Lee Shin Cheng’s ability to seize an opportunity when he sees it.

The plantation group’s executive chairman and CEO’s move to buy out its property arm may not surprise many, but some analysts feel IOI Properties Bhd’s minority shareholders deserve a better deal.

“We advise investors to sell the stock (IOI Prop) into strength,’’ CIMB Research said in a note to clients yesterday. The firm was “not keen” to swap IOI Prop’s shares for IOI Corp, but noted that the “alternative may be even less palatable.’’

IOI Corp late Wednesday offered to buy the remaining 199.7 million shares from IOI Prop minority shareholders at 0.6 share in IOI Corp at market price plus 33 sen cash per IOI Prop share.

This means that the offer price will fluctuate with IOI Corp’s share price movement. Shares in IOI Corp plunged 24 sen yesterday to RM3.68, while IOI Prop shot up 27 sen to RM2.49.

CIMB has a target price of RM3.20 for IOI Corp.

It opined that IOI Corp was “overvalued” at Wednesday’s closing price of RM3.92. It also argued that based on CIMB’s target price, the offer would equal RM1.92 worth of IOI Corp’s share plus 33 sen cash.

This works out to RM2.25 per IOI Prop share.

Maybank Investment Bank analyst Ong Chee Ting believed IOI Corp risked “low take-up rate” for its offer. Ong has a target price of RM2.90 for IOI Corp.

“Although it is unlikely to go down well with IOI Prop’s minority shareholders, the delisting would encouraged them to sell’’ as they won’t risk holding shares in an unlisted company, he said.

The deal breaker, however, are the government-linked funds Valuecap, Permodalan Nasional Bhd and the Employees Provident Fund, which collectively hold an estimated 10% stake in IOI Prop.

“If they act in concert and reject the offer, IOI Corp won’t be able to get the 90% acceptance,’’ said Tan Ting Min, an analyst at Credit Suisse Securities Malaysia wrote in a note yesterday.

He believed, however, that the market would see the privitisation as “marginally positive” for IOI Corp as it was value enhancing.

Credit Suisse upped its target price for IOI Corp from RM3.27 to RM3.31 yesterday.

IOI Corp needs to increase its stake in IOI Prop to above 90% to take the company private. Even if it failed to get the required number, IOI Corp said on Wednesday, it intended to take the requisite steps to delist IOI Prop from Bursa Malaysia.

“We believe the offer is fair, if not favourable, bearing in mind that IOI Prop may need to provide for impairment charges for its Sentosa Cove projects (in Singapore).’’ HwangDBS Vickers Research said in a report yesterday.

Based on Bloomberg’s consensus estimates, the IOI Corp offer was 36% below IOI Prop’s book value of RM3.63 and valued the company 8.9 times its forecast earnings for the year ending June 30, 2009.

Historical data showed that IOI Prop shares had been consistently traded above its book value since early 2000 until the middle of last year when equity prices worldwide collapsed.

“We lament the privatisation or delisting of IOI Prop as the company is one of the largest and most profitable developers in Malaysia and has been a benchmark and role model to many,’’ CIMB said.

The firm said IOI Prop’s revised net asset value stood at RM6.15 per share, or RM5.2bil. At yesterday’s close, its market value was RM2.07bil.

If the deal goes through, IOI Corp will fork out about RM64mil cash and issue some 116.9 million new shares at market price for the additional 24% stake in IOI Prop.

The deal, pending approvals from shareholders of both companies, is targeted for completion by end-June.

Source here

Change In Profile But Not Values

Lee Yoke Har's resemblance to older brother Datuk Lee Yeow Chor is uncanny. Soft-spoken and affable, her quiet strength and firmness are very similar to her sibling's when it comes to dealing with the issues of the day.

The children of IOI Corp Bhd's executive chairman and CEO Tan Sri Lee Shin Cheng, Yeow Chor is group executive director of the IOI group of companies and executive director of IOI Properties Bhd, while Yoke Har is the general manager of its legal and general operations department — a position that has enabled her to stay out of the public eye.

Two months ago, however, Yoke Har, who has been with the group for 13 years, donned another hat. She took over the marketing operations of the group's property division, which is a hot seat indeed, given the current tough property market conditions.

"I am not a corporate person," Yoke Har stresses to City & Country in what is her maiden media interview. "Please focus on the exciting projects and plans we have to share with you…

" She reports to IOI Properties' executive director Datuk David Tan, a trusted chieftain of the Lees and who has been with the group for ages. Then there are her brother and father.

With Yoke Har spearheading the marketing portfolio for the property division, Tan is free to focus on other equally demanding chores, with project management being a priority.

"He has a lot on his plate and he needs to juggle his time a lot," explains Yoke Har, whose newly put-together team oversees the marketing of key Klang Valley developments, comprising those in Puchong and Klang and IOI Resort in Putrajaya.

The changes being effected are aimed at coordinating and expediting decisions so that the developer can move at a fast clip. Raising the profile of IOI Properties — a brand that is synonymous with dependability and being conservative and low profile — is also in the works.

Says Yoke Har: "We want people to know us... It is high time there was coordinated effort to do this. Our style has always been to do things quietly; do it well and people will know. (But it has been) too quiet. This has been going on for years. But our values have not changed…"

For IOI Properties, indisputably a top Malaysian property developer that has been active since 1982, the changes are perhaps overdue, seeing how the demands of property investors have surged in recent times.

No, the changes are not a knee-jerk response to the troubles ailing even the most established players across the globe, says Yoke Har. In fact, she sees the property market bottoming out in nine months. "There is liquidity; people are holding back for fire sales but this has not happened." With the property market getting more crowded and the investment climate more jittery, even the unobtrusive IOI Properties is reviewing its strategies, going forward. This is necessary because the developer plans to launch some RM500 million worth of properties in the Klang Valley this year. The offerings will come from Bandar Puchong Jaya, the newer Bandar Puteri Puchong and Bandar Puteri Klang. In Bandar Puchong Jaya, which sprawls over 1,000 acres, more upmarket homes, like the 2½-storey superlink Vistaria Residences, have emerged in the residential component. The next six months will see the launch of sixty 2½-storey semi-detached homes and light industrial units here. Meanwhile, almost 80% of the 930-acre Bandar Puteri Puchong has been developed. It will unveil thirty-six 2 and 2½-storey bungalows and seventy-eight 3 and 4-storey shopoffices over the next half year. Over in Bandar Puteri Klang, new homes and shopoffices will be rolled out from end-February. In short, IOI Properties is not about to put a stop to new launches.

PUCHONG FINANCIAL COMMERCIAL CENTRE

So, exactly what is going to be different about the developer? For starters, it will embrace fresh and compelling development concepts and designs. Add to the concoction a loyalty programme designed to reach out to and please both buyers and occupants to secure repeat buying.

The new and bolder designs are evident in the upcoming Puchong Financial Commercial Centre (PFCC) taking shape diagonally across the Damansara-Puchong Highway (LDP) from the IOI Mall. Work on two of the five PFCC towers on an eight-acre freehold tract is slated to be completed this April. "These are not very high — 11 and 20 storeys. But you will not miss them as you drive along the LDP," says Mohd Ezuddin Sami'an, IOI Properties' marketing manager.

"They are iconic… they stand out from the other buildings in Puchong.

" Puchong has too many traditional shophouses and offices, says Yoke Har. She is confident a "happening" PFCC, with its contemporary design incorporating environmentally friendly features, will lift Puchong's image to even that of Bangsar.

Looks and design aside, the developer is counting on the proximity of Cyberjaya as drawing point. However, a building can only be audited as a Cyberjaya Centre upon its completion. "We are confident of getting the status," says Yoke Har, adding that the building designs have incorporated the necessary criteria.

While the original plan was to build all the five towers in four to five years, the timeline had to been tweaked to seven to eight years in the light of the current global credit turmoil. So, the developer is improving the designs of Towers 3, 4 and 5, based on the experience and feedback from the nearing completion of Towers 1 and 2.

Combined, the five towers will offer a net lettable area of 1.15 million sq ft. The 12-storey Tower 1 (built at RM35 million) will have 125,000 sq ft, and the 20-storey Tower 2 (built at RM70 million) 253,000 sq ft. In all, there will be 1,920 parking bays in the basement, all of them interlinked.

The developer has tagged an average RM600 psf for Tower 1, while it intends to keep the LDP-fronting Tower 2 for investment. Office space in Tower 2 is being leased out at an average of RM4 psf, while the retail space is going for RM6.50 psf or so.

It is worth noting that weak market sentiment notwithstanding, two local parties have shown interest in the buildings, with talks already in the second stage. One party is looking at leasing Tower 1 en bloc while the other is exploring a buy-and-lease-back option for Tower 2.

"We are flexible; we cannot be leaving the buildings empty for six to nine months, so if the price is good, we don't mind selling..." says Yoke Har, without disclosing the numbers now on the table. One of the parties is looking at relocating its operations, while the other is expanding and relocating its business.

IOI BOULEVARD

About a kilometre down the thoroughfare from PFCC, workers are putting the finishing touches to IOI Boulevard, a hybrid office-retail/lifestyle development modelled after London's Covent Garden. "Business sophistication" and "stylish entertainment" are some of the developer's taglines for this development that comprises six blocks of office-cum-retail space. Enclosed within is the Palette, which comprises thirty-six 2-storey retail outlets that look into a 108ft by 240ft courtyard. "This will be a platform to promote arts. Budding artists, musicians and photographers, for example, can showcase their work here free of charge. We will also build a stage in the courtyard, which will be shielded by a tinted, high glass ceiling," says Yoke Har, adding that they have factored into the design the need for air to circulate.

The developer has tied up with LimKokWing University, whose students will paint two murals in the Palette. IOI Properties is also working with the Puchong Orchestra to explore ways to promote the latter.

Of the six office-retail blocks, all equipped with individual lifts, the developer plans to keep two, both fronting the LDP for recurrent income. Since its launch last June, 60% or 262,000 sq ft of the total saleable area of just under 446,000 sq ft have been sold at an average of RM450 psf, with the ground floor retail space going for RM980 psf. Space at the Palette is leased at an average of RM6 psf. In all, IOI Boulevard offers a total net lettable area of about 730,000 sq ft, with another 133,000 sq ft in retail space at the Palette.

IOI Boulevard is targeted for completion in April and is likely to be opened in May. It will be interesting to see how much IOI Properties can do to bring arts to live in Puchong.

SIERRA PUTERI

Outside the Puchong boundary closer to Sepang, earthworks for a 485-acre mixed development township with a gross development value of RM1.6 billion called Sierra Puteri, have been completed. Construction will start as soon as the authorities approve the building plans. The gated development on undulating grounds will boast designs in departure from IOI Properties' norm. However, the layout will still be functional, says Yoke Har.

The lower-density units will be designed after precincts, each of which with its own park. There will be lots of buffer parks, she continues. The maiden launch, featuring the traditional 2-storey 2ft by 75 ft terraced homes, has been slated for the second quarter this year at a pricing she declines to reveal immediately.She would however only say that it will be priced at a premium to the conventional link homes in the close by Equine Park.

IOI Properties' move to go slightly up markat at Sierra Puteri makes sense given the abundant traditional offerings coming up in Equine Park. IOI Properties' target market: Puchong and Kajang upgraders and those staying in Serdang of course.

IOI FAMILY

Fostering loyalty in customers is an integral part of marketing and it is no different for developers. Come late March or April, IOI Properties will unveil its loyalty programme, which will see some 85,000 IOI Privilege Cards distributed, in the developer's two townships of Bandar Puchong Jaya and Bandar Puteri Puchong.

The cards will be given out free to those in the catchment area to shop, dine and enjoy other services for less in participating shops in Puchong, where the developer has built some 1,700 commercial units.

The developer will also take on the role of promoting the participating outlets, which are expected to offer 10% to 15% discounts or privileges in kind for a year. So far, 60 outlets have signed up. Potential candidates are tenants in IOI Mall — 199 in the old wing and another 100 in the new extension, which at press time was awaiting its certificate of fitness. The extension expands IOI Mall's 650,000 sq ft of net lettable space to about a million sq ft.

Yoke Har is particularly excited about the loyalty programme and it is easy to see why. A thriving township can only equal an appreciation in capital values and yields. And happy investors could potentially translate to repeat buyers. So clearly, IOI Properties is the ultimate beneficiary of the programme, if it works.

The community-based programme, Yoke Har points out, is an extension of the developer's community services which it undertakes seriously and with commitment. "We have been working a lot behind the scenes. Do you know we have someone dedicated to working with the residents' associations in Puchong? Besides our website, we also publish a bi-monthly residents' newsletter called Reach Out…"

"We want to make residents feel privileged. At the same time, we are supporting the business operators in our townships as part of our after-sales service. The programme makes sense — these are self-contained townships; everything one needs one can find there. The convenience, the variety, now the pricing with the discounts offered," she adds.

Yoke Har does not discount the possibility of the IOI Privilege Card being used by third parties, which augurs well for the participating businesses. Obviously, the plan to extend the coverage of the loyalty programme is on the cards.

IN THE PIPELINE

Traditionally a township developer, IOI Properties has withstood the test of time and thrived on the legacy of its developments. Recurrent income from property investments and property management fees now help make up the property division's 30% or so contribution to IOI Group's earnings. The ratio, Yoke Har says, is going to change with more emphasis on property, but she is unable to immediately provide the numbers.

IOI Properties is also active outside the Klang Valley, for example Singapore, although plans there have been deferred given the current downturn.

Another project to look out for is a mall planned for Putrajaya, the details of which the developer declines to divulge for now. All said, IOI Properties is geared to give competitors a run for their money.

Source: The Edge Daily

Planters urge government to help stabilise palm oil prices

KUALA LUMPUR, Nov 25 - Malaysia's top plantation companies have suggested government incentives for industries to switch to palm bio-diesel as well as burning the oil as feedstock to generate power as part of initiatives to stabilise prices.

The proposals come in the face of excessive crude palm oil (CPO) supplies at a time of slowing demand and prices a third of their peaks.

Giving their full support for the government's initiatives to allocate RM200 million to replant 200,000 ha of ageing trees, the planters said factories and even fishermen - currently on diesel subsidies - could shift to CPO use with the right incentives.

"The more oil we can consume in the country, the greater the chances of stabilising the price of palm oil," said Kuala Lumpur Kepong chief Lee Oi Hian.

KL Kepong, along with IOI Corporation, Sime Darby, United Plantations, Felda Holdings and Boustead Holdings, produce about 60 per cent of Malaysia's total CPO.

Following a meeting of the players yesterday, the company heads told a media conference that despite the "very challenging period", they were still profitable at current CPO prices of around RM1,500 per tonne and
not in a 'distress situation'.

"We are still making profit although we may not like those profit figures," quipped Lee.

IOI executive chairman Lee Shin Cheng said he expected prices to recover and to average RM2,000 to RM2,400 next year.

Even so, with about two million tonnes of stock and prices close to breakeven point for the less productive planters, the companies with the backing of the Malaysian Palm Oil Board are looking to a RM500 million
price stabilisation fund to maintain prices.

One of the world's largest palm oil producers, Malaysia's annual output should hit an estimated 17.5 million tonnes, but global demand has shrunk in the economic downturn despite the vegetable oil's huge discount of up to US$250 per tonne to soya oil.

"The industry is asking if we can put part of the money available to support the price," Lee said of the RM300 million that remains of the fund, given that RM200 million would go towards replanting efforts.

Whether the government agrees to the suggestions, which have yet to be formally presented, remains to be seen - but national utility Tenaga Nasional has pointed out it is not feasible to use CPO as feedstock given
it would cost more than coal.

In February, the government plans to implement the use of blended bio-diesel fuel in government vehicles, and analysts estimate the production of the B5 biofuel with 5 per cent palm oil would remove 500,000 tonnes of palm oil annually when fully implemented in early 2010.

The planters who want fertiliser costs reduced by half said they would adjust costs by reducing the amount of fertiliser used. Fertiliser accounts for half the production costs but it has increased two-fold since the beginning of the year. - Business Times Singapore

Of oil palm, douches, insects and Tamil songs

YOU can always tell a planter's hands. They are big, calloused, wrinkled and very, very strong.

When I first shook hands with Datuk Leslie Davidson, a 77-year-old former planter, I was left with numb fingers before blood flowed into my right hand.

In an interview with Davidson and Mahbob Abdullah, his friend and former subordinate, both talked about their upcoming books.

Scheduled to be launched in early 2009, the books tell of their amusing and poignant experiences as planters in the tropics between the 1950s and the 1980s.

Davidson was also in Kuala Lumpur to receive the Merdeka Award from Prime Minister Datuk Seri Abdullah Ahmad Badawi for his outstanding contribution to Malaysian people.
The Merdeka Award, a Petronas initiative co-founded with ExxonMobil and Shell, came with a trophy, certificate and RM500,000 cash.

Davidson's contribution could be attributed to efforts 30 years ago when he initiated efforts to get weevils, insects from Cameroon, to pollinate oil palm trees in Malaysia. Since then, the oil palm trees have been merrily producing more fruit bunches, making Malaysia the world's biggest palm oil exporter.

As Davidson sat himself down beside Mahbob, he said, "the Merdeka Award is actually a team effort".

I stole a glance at Mahbob. "My boss is right. Maybe the award money should be divided among team members, too," he said, and laughed, "there were thousands of us".

In chapter 10 of Mahbob's book titled "Planters Tales" and chapter 37 of Davidson's "East of Kinabalu", they tell how oil palm companies had to spend a lot of money to hire hundreds of workers just to manually harvest pollens from male flowers of oil palm trees to pollinate female flowers.

Teams of workers patrolled the estate daily searching for male flowers to collect the pollens. This was then issued to other teams who went around pollinating every receptive female flowers with hand puffers.

"Ironically, by trial and error, we found the ideal instrument for this delicate operation to be vaginal douches," he said.

When Davidson submitted orders for vaginal douches, Unilever headquarters in London was very surprised and immediately questioned if he was carrying out birth control programmes among his estate workers.

Davidson promptly replied, "Oh, quite the contrary, we're actually trying to increase fertility rates among the trees to get them bear more fruits".

While top management approved of the orders, Davidson was constantly reminded that Sabah estates' oil palm yields were lower than in Johor and Cameroon.

Undeterred and unconvinced by textbook knowledge which claimed that palm fruits were wind-pollinated and that heavy rain washes pollen away, Davidson arranged for more research to prove that pollination in West Africa was largely due to weevils which were not found in Malaysia.

Under Davidson's instruction, Dr Kang Siew Ming, Zam Karim, Dr Tay Eong Beok and Mahbob went to Cameroon to assess the work of Dr Rahman Anwar Syed, the entomologist who was assigned to study oil palm pollination by insects in Africa, especially the Elaieidobius kamerunicus specie.

"It ended up with the two ladies Dr Kang and Zam climbing the oil palm trees," Mahbob said.

Asked what he and and Dr Tay did while the ladies were up on the trees, Mahbob replied, "we stood underneath and made sure that they didn't fall down".

Jokes aside, Mahbob is most probably remembered among members of East Malaysia Planters Association for being the very persuasive money collector for the RM2 million weevils project.

The Unilever Group was the first to pay but Sabah Land Development Board was the biggest contributor.

Incidentally, the estates that Davidson and Mahbob used to work and live in Johor and Sabah are now owned by IOI Corp Bhd. To this day, the almost 70-year-old IOI Group executive chairman Tan Sri Lee Shin Cheng still makes his regular rounds at these estates.

Lee's talent in serenading Tamil songs to his oil palm trees may seem surprising to many but it reflected Incorporated Society of Planters (ISP) requirement that all planters must be proficient in commonly-used languages at the estates.

Davidson recalled preparing for the Malay and Hakka language tests almost 60 years ago. At that time, the ISP examiner said, "You will find Hakka very useful in North Borneo," and asked, "Nyi thuk-ko-kai shu, han ki-tet mau? (Do you still remember your studies?)"

Davidson replied, "Yit pan ki-tet, yit pan mong-ki liau. (Half remember, half forgotten.)

The examiner liked what he heard and Davidson passed the Hakka test with flying colours.

Mahbob was also lucky. In his second book entitled "Planter Upriver", Mahbob told how he was slow to start learning Tamil but eventually aced the test.

At that time, Mahbob's contract as an assistant manager at Tanah Merah Estate in Tangkak, Johor, required him to pass the Tamil language test. He found a very patient tutor in Krishnan, an 18-year-old son of a worker. Also, Mahbob's love for Tamil and Hindi movies might have helped.

Asked if he is able to sing Tamil songs, he winked and smiled, "If Tan Sri Lee invites me to his estates, I certainly don't mind a duet".

Source here

Property groups find asset sales tough going

A SERIES of aborted divestments by Singapore property groups lately highlights the challenges of relying on asset sales in the current environment.

Last weekend’s edition of BT featured two stories on the same page, on Singapore’s two biggest listed property groups - CapitaLand and City Developments Ltd (CDL). Both are in the same boat, with their respective planned divestments of overseas assets not completed.

CDL’s London-listed hotel subsidiary Millennium & Copthorne Hotels announced that the agreement for the disposal of Millennium Seoul Hilton hotel to Korean group Kangho AMC Co had been terminated as the buyer was unable to finalise its financing arrangements amid the global financial turmoil.

CapitaLand’s 30 per cent-owned associate Inverfin Sdn Bhd, which owns Menara Citibank tower in KL, reported that the sale-and-purchase agreement for the sale of the office tower had been terminated as the buyer, IOI Corporation Bhd, did not pay the balance purchase price on the completion date.

There have also been instances of transactions of Singapore buildings not being completed. Ho Bee announced last month that its proposed $30 million sale of Frontech Centre, an industrial building in Bukit Merah, had fallen through. The buyer is understood to have been US fund group Angelo Gordon. BT also reported last month that Australian property fund manager Blaxland did not go ahead with completing its planned acquisitions of eSys Technologies’ building in Changi North and SH Cogent Logistics’ warehouse building in Penjuru Close in Jurong.

The pullouts reflect the difficult conditions for property investment sales, caused by several factors. Firstly, funding is tight. But even potential buyers with financial muscle may get cold feet or decide it simply makes more sense to walk away from their purchase now and forfeit the deposit, as sliding property values will present more attractive investment propositions in due time. There may also be other issues at play, such as exchange rate fluctuations. For instance, from a potential buyer’s perspective, the Aussie dollar’s 21 per cent depreciation against the Singapore dollar in the past three months would make purchasing Singapore properties less attractive.

Putting things in perspective, a seasoned property consultant said: ‘The current climate makes asset sales difficult, whether you’re selling an apartment or a shopping centre.’

Property groups will have difficulty selling assets even to their sponsored real estate investment trusts (Reits). With the stockmarket slide, Reits are trading at very high yields, which makes it difficult for them to make yield-accretive acquisitions. And the current tight funding environment affects Reits as well; their priority these days is refinancing existing debt instead of sourcing new debt for further acquisitions.

The situation is likely to continue for at least the new few quarters; that will have implications for Singapore’s property groups. Heavyweight CapitaLand has booked handsome profits from divesting assets in the past few years. In the past two years, the group has divested some $9 billion of assets - an exercise that has generated well over $1 billion in profits.

The group still has other assets that it could potentially divest, such as its industrial property portfolio here and even some of the office blocks held by its sponsored Reit CapitaCommercial Trust.

Prior to the global financial crash, CapitaLand would have had a high chance of success if it had continued on its path of asset disposals. Now, buyers are scarce and even those that are around would demand distressed sale prices (as cushion against further declines in property values after their purchase).

The trying financial climate will affect asset divestment strategies of even a heavyweight like CapitaLand. But at least it has stronger financial muscle to weather this storm even if it can’t make major divestments in the near future.

Smaller players are not in the same boat. Some companies burdened with heavy debt and which had been hoping to unload some of their properties to improve their balance sheets will be caught if they can’t sell their assets.

Hopefully, the malaise in the property investment sales market will not drag on too long.

Source : Business Times - 2 Dec 2008

IOI aborts Menara Citibank purchase

by Khalil Adis

IOI Corporation Berhad´s has aborted its proposed RM586.7 million acquisition of Menara Citibank, causing it to forfeit an earlier payment of RM73.4 million, the company has revealed in a statement.

The company cited the worsening global financial crisis as the reason why it has decided to call off the acquisition.

“Due to the recent sudden adverse developments in the global economic environment which have spread to this region and impacted negatively on business sentiments, the company has, after due and careful deliberations, decided that it would be in the overall best interests of the company and its shareholders not to proceed with the proposed acquisition,” IOI Corporation said in a statement.

IOI Corporation made agreements with the various vendors last August comprising Citigroup unit, Menara Citi Holding Company Sdn Bhd (50 percent), CapitaLand (30 percent) and Amsteel Sdn Bhd (20 percent).

It became unconditional on 31 October and the due date for payment of the balance of the purchase price was 11 November.

IOI Corporation then received a letter from the vendors´ solicitors dated 26 November, stating they were terminating the agreement with immediate effect. The sum of RM73.4 million paid earlier, together with accrued interest, was forfeited as liquidated images.

IOI Corporation said it is currently seeking seeking legal advice as to the propriety and quantum of the aforesaid forfeiture.