UEM Land ... July 09

Sources say it plans to issue some RM550 million in convertible bonds to raise funds that will be used mainly to speed up the development in Bandar Nusajaya in Iskandar Malaysia.

It is learnt that because of the economic slowdown and credit crunch, sales have been slower that expected and this has affected cash flow. UEM Land does not have the cash in hand and so is looking at the bond market to continue building up infra.

AS at March 20009, UEM Land recorded a deficit in its operating cash flow, amounting to Rm17.11 million.

The conversion price of the convertible bonds is not known yet but UEM Land is essentially a play on the value of its main asset, which is the 9654 acres of land it has in Bandar Nusajaya that forms the main part of Iskandar Malaysia.

At the current price of Rm1.60 per share, it translates to about RM13 per sq ft. But then the strike price for the convertible papers, expected to have a tenure of five years, is anticipated to be much higher. This is based on the assumption that the land price in Bandar Nusajaya will increase significantly over then next few years, considering the massive development taking place there.

For every change in the land price, it will add about 12 sen to the revalued net asset value of UEM Land. So if the assumption is that the average land price is RM20 psf, the strike price could go up to Rm2.50.

Apart from slow sales that affected cash flow, UEM Land ahs also seen a pull out from one of its partners undertaking a portion of the project in the flagship Puteri Harbour development. In June 2009, Damac Properties pulled out of the project.

Apart from Damac, UEM Land is undertaking a few project with a few others, such as UM Land and Limitless holdings Pte Ltd. Limitless has so far injected its share of capital for the development of Puteri Harbour and its unlikely to pull out.

While the Puteri Harbour project is among the most pretigious for UEM Land in Iskandar Malaysia, the company is undertaking seven other developments in Bandar Nusajaya.

UEM Land is supposed to undertake the third phase with its own financing after which the company will lease out the buildings to the federal government on a long term basis.

Its long term liabilities are RM602 million, out of which a large chunk is believed to be due to Khazanah in 2013.

Related:
UEM Land ... Nov 2008
UEM Land ... Jan 2009
UEM Land ... Feb 2009
MRCB/UEM Land ... May 09
UEM Land Holdings Bhd ... Jun 09