Sin Chew Daily , 11 October 2011 - RM65 million development through land acquisition DIJACOR Is Expected to gain high profits
Sin Chew Daily , 11 October 2011
(Kuala Lumpur, October 10) DIJACOR Institution (DIJACOR, 5401, Main Board Industry Unit) spends RM65 million on the acquisition of 0.6 acres of land in Sultan Ismail Road, Kuala Lumpur Golden Triangle, to develop serviced apartment and commercial offices, a highly profitable acquisition according to OSK Research.
OSK Research points out that land is getting scarce in this area. Yet, many multinational companies and foreign banks have set up office in this area because of the high traffic flow. Even though the acquisition price is 20% higher than the market rate, or RM2,400 per square foot, it is still reasonable mainly because of higher rental and occupancy rates.
After the acquisition of this section, Tropicana Sultan Ismail will be developed locally. Previously, RM958 million has been spent on W Kuala Lumpur hotel and serviced apartment along Ampang Road, targeted to be completed by 2016.
Dijaya plans to finance the above-mentioned plan through internal capital and bank loan, and currently the debt ratio is 0.1 times. Despite its heavy development commitments, Dijaya is at a strong financial standing to develop several projects in Johor and Klang Valley.
Voluntarily unlock value of current assets
Dijaya voluntarily unlocks the value of current assets, including Tropicana City Mall, Tropicana City Office Tower as well as W Kuala Lumpur. Freeing up the assets will unlock extra capital for future financing.
With the announcement of Malaysia Budget 2012, from next year the RPGT will increase for properties sold within two years of purchase. However, it should not affect purchasers of high-end properties.
Maintaining a neutral rating on Dijaya’s stock, the target share prices have been revised downwards from RM1.64 to RM1.33. Taking into consideration a private share placement which is being implemented currently to the tune of 30% of the share capital - or 177, 472, 410 shares - the dilution effect would have to be considered