RISING LIKE A SPIRE!
Magna Prima comes out
By Darshini M. Nathan
YEAR 2005 is being hailed as the year for small- and medium-capitalisation stocks to strut their stuff and recapture the interest of investors who were bowled over by blue chips last year. Magna Prima Bhd may have what it takes to do just that.
After all, the second board-listed company secured the contract by Telekom Malaysia Bhd to jointly develop a five-star condominium which would bear the elite Kuala Lumpur City Centre address.
In addition, it is working to secure more joint-venture projects this year to bolster its earnings once the contribution from its flagship development in Kepong, Kuala Lumpur tapers off in the years to come.
Also, with former City Hall mayor Tan Sri Kamaruzzaman Shariff recently appointed chairman of its board, there is indeed a greater chance of things moving in the right direction for the company.
Still, there is no getting away from one major issue. The property development cum construction outfit is very low profile and as a result is often overlooked by investors, analysts and potential clients alike.
There is little to associate the group with its biggest property project undertaken thus far – Metro Prima. On the construction side, it was awarded the Putrajaya Wetlands project. It was also one of the earthwork contractors behind the KL International Airport.
As a result, when it was announced early last year that Magna Prima had secured the Telekom contract, the immediate response of some industry observers was “Magna who?”
The company is behind the community regeneration project that took off in Kepong, Kuala Lumpur almost 10 years ago.
For now the strategy is to continue to undertake developments in the Klang Valley on a joint-venture basis, says Ghazali.
Its joint venture with City Hall Kuala Lumpur basically saw the builder end up with the development rights to an 88-acre piece of land in Kepong.
Part of the deal was for Magna to revive and revitalise the area by providing housing for the squatters.
Says its executive director Ahmad Ghazali Md Kassim, “ There was just so much to do (with the Metro Prima project) that there was no time to shout out and get noticed. Now, we feel the time is right to show ourselves in the market.”
Apart from having to convince and assure the squatters about the company's plans for the area, Ghazali says it took all of three years to sell the location to retailers.
But all that is changing. Jusco has set up shop on a nine-acre site and OCBC Bank has chosen the area to set up one of its bigger branches.
In terms of low-cost housing, the company has delivered up to 1,100 units. The balance, comprising another 1,400 units, will be delivered by August this year.
In addition, Magna has launched Plaza Prima, a medium-cost development based on the shop offices-downstairs-condominium-upstairs concept. Next to come on the market is Casa Prima, a 252-unit condominium development with prices ranging from RM170,000 to RM400,000 per unit.
“Our shop offices in Plaza Prima are almost fully sold. What's left are the Bumi(putra allotted) units. The apartments have achieved a take-up (rate)of about 70% currently,” Ghazali says.
The Metro Prima project carries a total gross development value (GDV) of about RM750mil. To date, about RM600mil has been locked in. As at mid-January, unbilled sales stood at RM160mil.
“Metro Prima will continue to drive the bulk of the group's earnings in financial year 2006 and 2007,” says Ghazali.
For the first nine months to September 2004, the group registered a lower net profit of RM139,000, compared with RM2.3mil a year earlier. Turnover declined 34% to RM76mil year-on-year.
With only a quarter of the total land bank in Kepong still undeveloped currently, Magna Prima is moving on to secure other projects that will drive its earnings going forward.
For now, Ghazali says the strategy is to continue to undertake developments in the Klang Valley on a joint-venture basis.
“We are studying some opportunities to acquire land bank but we have to have the financial resources for that. The target is to first lock in a GDV of RM500mil. This will generate the cash flow for any land acquisitions,” he explains.
The softe launch of the Avre.
Magna Prima is also close to closing a deal with the owner of a land parcel in Selayang. The project, if it takes off, will carry a GDV of RM180mil. It will contribute to earnings in the current financial year as the plans and development order are already in place.
In addition, Ghazali says that the company has submitted a proposal to develop a piece of land in the upmarket Bukit Tunku enclave.
Then, there is “The Avare“, Magna Prima's RM200mil joint-venture project with Telekom that is scheduled for launch this March.
The project, comprising 78 units priced between RM700 per sq ft and RM900 per sq ft, will mark Magna Prima's maiden foray into high-end property development.
But how is a company without a track record in the upmarket segment to compete with some of the bigger boys in a locale already bursting with competition.
The last count showed that there are ten property developers vying for the attention of prospective buyers drawn to the idea of luxurious city living.
Ghazali reckons that while there may be many developers in the area, each are launching only a limited number of units in the market.
“Supply is still restricted. Furthermore, we feel our design and concept is rather unique. We have assembled the best team for the project... from design right down to landscaping and finishes.”
Magna Prima's partnership with a big and well-known brand like Telekom, which will receive 20% of the project's total GDV, also helps in this case.
On the construction side, Ghazali says that efforts have been made to venture overseas to markets in the Middle East, Sudan and Thailand.
“We hope to build on our track record in housing development. But property development will continue to drive our earnings in the near- to medium-term,” he says.
The group expects to complete a private placement involving 4.2 million new RM1 shares this month. The exercise is expected to raise gross proceeds of about RM6.4mil, which will be utilised as working capital.
Over the week, Magna Prima also proposed a rights issue of up to 23.8 million warrants on the basis of one warrant for every two shares held in the company, at an issue price of 30 sen per warrant.