Wednesday, February 9, 2011

CHHB ... Feb11

There has not been a new development at the Mines Resort area — the home territory of Country Heights Holdings Bhd (CHHB) — for many years, although its surrounding neighbourhoods have experienced rapid transformation.

CHHB, which is a major landowner in the area, has been keeping a low profile since the Asian financial crisis, while many developers — some with shorter histories — have flourished.

But, the years of sluggish activity at the Mines and CHHB may soon become a thing of the past. The Country Heights group, including CHHB, is planning a RM3 billion, 10-year integrated health and wellness resort project at the Mines Resort area.

The huge value of the project aside, the wellness resort’s status as one of the Entry Point Projects (EPP) under the government’s Economic Transformation Programme (ETP) has added some glamour to CHHB’s image.

The company may reveal details about the wellness resort project as early as March 2011, in conjunction with the launch of its expanded 30,000 sq ft (from 10,000 sq ft) “health screening centre”, or at a later stage.

The expanded health screening centre, which is at CHHB’s Palace of the Golden Horses hotel, is one component of the wellness resort project.

CHHB is not the only land owner [in the Mines Resort area], Tan Sri Lee [Kim Yew, founder and major shareholder of CHHB] and other land owners in the Mines area are also involved in the project.

The wellness resort project will help add value to CHHB’s landbank and properties at the Mines Resort area.

CHHB still has 153.4 acres of “lake land” at the Mines, which were carried at a net book value of about RM13.8 million or RM2.04 per sq foot (psf). But, while the psf-cost for the property is next to nothing, considering current market prices for nearby bungalow plots are between RM250psf and RM300psf, it is worth noting that the lake land is essentially a lake and is not land that can be easily developed.

According to its officials, what can be done, however, is to construct a “floating structure” at the lake edge to monetise the lake while still maintaining the views, which are a valuable asset What can be immediately developed or re-developed for the wellness resort project include some of the remaining plots of land at the Mines where current properties are located.

Considering that CHHB acquired the land and sank in the necessary infrastructure costs many years ago, further development or re-development of the remaining land area at the Mines could generate lucrative returns for the company.

In its FY09 annual report, the 34.93 acres of the restaurant, hotel, apartments and business park sites were carried at a combined net book value of RM198.8 million or RM130.70 psf.

It is difficult to draw a direct comparison with other sites in the area because the CHHB’s properties’ net book value reflects not only land but property in various form such as offices and hotels. As a reference, nearby commercial land in the Seri Kembangan area is fetching at least RM75 to RM100 psf, while built-up prices for high-rise properties in the area — be they commercial or residential — are between RM350 and RM380 psf.

Plans for the wellness resort project aside, CHHB is also becoming more active in the property development scene, with projects worth RM400 million to RM500 million in gross development value (GDV) to be launched in 2011 and 2012.

The bigger projects include a condominium development in Cyberjaya with a GDV of about RM70 million, condominiums at the Mines (GDV of RM130 million), the remaining bungalow lots in Country Heights Kajang (GDV of RM130 million) and a residential development in Alor Setar worth about RM50 million.

Other than the Mines Resort area and Country Heights Kajang, CHHB has other sizeable tracts of undeveloped land in the Klang Valley as well as its outskirts that appreciated in value over the years.

The company has about 26.23 acres remaining in Cyberjaya for mixed development. He adds that the land holds good potential due to the opening of the KL-Putrajaya highway that has shortened the travel distance significantly between Cyberjaya and downtown Kuala Lumpur.

In CHHB’s FY09 annual report, the Cyberjaya land, acquired in 1999, was carried at a net book value of RM42.37 million, or RM41.90 psf. It is worth noting that in August 2010, Glomac Bhd bought seven acres or 304,920 sq ft in Cyberjaya for RM27.44 million or about RM90 psf.

CHHB also has 23.75 acres left in Country Heights Damansara, acquired in 2000, which hhas benefited from surging land values in the nearby area brought on by the development of Desa ParkCity. To enhance the value of the land, the company has spent RM10 million to improve the accessibility to the area.

CHHB’s total borrowings as at Sept 30, 2010, amounted to RM342.9 million, against cash holdings of RM56.8 million. Net gearing was 0.4 times and its shareholders’ equity RM705.5 million. The gearing level has been brought down significantly from 1.4 times in FY06, when net borrowings totalled RM796.2 million against lower shareholders’ equity of RM568.1 million.

The group lightened its once debt-heavy balance sheet considerably following the disposal of the Mines Shopping Mall for RM432 million in 2007. The property is now (Jan 2011) part of CapitaMalls Malaysia Trust.

It does not have convertible securities outstanding that may dilute existing shareholders.

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