The Edge, 9 June 2011 - Dijaya buys 88.5 acres in Subang

The Edge, 9 June 2011

Plans for RM2.5 billion residential and commercial development on the tract

KUALA LUMPUR: Dijaya Corp Bhd, best known for its development of Tropicana Golf and Country Resort, has acquired 88.5 acres (35.4ha) of freehold land in Subang Hi-Tech Industrial Park, Selangor.

The land was acquired from Chunghwa Picture Tubes (Malaysia) Sdn Bhd (CPT) for RM385.5 million.

The company said in an announcement yesterday that it plans to build a mixed residential and commercial development with an expected gross development value (GDV) of RM2.5 billion on the tract, which borders Subang Jaya and Shah Alam.

Apart from the land in Subang, Dijaya also acquired 12.9 acres in Kampar, Perak, for RM5.6 million from CPT and Makolin Electronics (M) Sdn Bhd, a company owned by Chunghwa Picture Tubes (Bermuda) Ltd.

The land in Kampar is to be converted to a mixed residential and commercial development featuring five-storey apartments and four-storey shop offices. The estimated GDV for this project is RM123.7 million.

The acquisition of the land is particularly significant for the mid-sized developer as it marks a strategic move to secure a greater foothold in the Klang Valley.

The proposed transaction price of RM385.5 million translates into about RM100 psf which more or less reflects the market value as parcels of land closer to Shah Alam have been transacted at about RM80 psf.

Dijaya said in a statement the Subang land is located in a sought-after area of the Klang Valley within an established neighbbourhood with amenities and easy accessibility.

"Development in the vicinity still offers an upside in terms of capital appreciation and yield due to the limited supply of sizeable [pieces of] development land that would allow a developer to plan for a comprehensive project," the company said.

According to analysts, assuming Dijaya gets a margin of about 20% for the Subang project, it would result in a profit of about RM500 million over the tenure of the project, which would contribute significantly to Dijaya's bottom line.

Based on its unaudited results, the company returned a net profit of RM44.8million on a turnover of RM292 million for FY10-ended December.

The company said it intends to fund the proposed acquisitions and development costs through internally generated funds and bank borrowings.

"The exact mix will be determined by the company management at a later stage after taking into consideration Dijaya and its subsidiaries' gearing level, interest costs and internal cash requirements for its business operations," it said.

As at March 31 this year, Dijaya had RM24.4 million in short term borrowings, RM220.22 million in long-term borrowings and RM246.72 million cash.

Dijaya said the proposed acquisitions, expected to be completed in 4Q11, would povide an excellent and timely opportunity for the efficient deployment of its surplus financial resources to achieve better returns for its shareholders in the long term.

Dijaya recently announced its first foray into the hospitality business by teaming up with US-based Starwood Hotels and Resorts Worldwide Inc to develop W Hotel in Jalan Ampang near the iconic Petronas Twin Towers.

The group has developed all but 20 acres of its 625-acre landbank in the Tropicana Golf and Country Resort in Petaling Jaya, but still has about 50 acres in the adjoining Tropicana Indah Resort Homes.

The counter closed unchanged at RM1.14 yesterday with 93,900 shares changing hands. Based on its net assets per share of RM2.02 as at March 31, 2011 , the counter is trading at a price-to-book value of 0.56 times.