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Execution Wheels In Motion for South Johor
The HK Factor
An advisory committee which include 5 BSDs, some more so than others, has been put together to look into the development of the Iskandar Development Region (IDR) in Johor. The main objective is to figure out ways to lure foreign investments and turn the growth corridor into an attractive investment centre. Badawi apparently handpicked the five, thanks goodness KJ was not picked. The interesting thing is that all 5 areJohoreans and have agreed to be on the committee. The munificent 5 are: Tan Sri Samsudin Osman, Tan Sri Kishu Tirathai, Andrew Sheng, Tun Musa Hitam and Robert Kuok.
I am pleasantly surprised with the inclusion of heavyweights such as Andrew Sheng and Robert Kuok. There is a deliberate weighting to people who have successfully delivered outside of Malaysia, in particular HK, and with a solid reputation in Asia-Pacific. Andrew Sheng was the chairman of the Hong Kong Securities and Futures Commission, a post he has held since October 1998. He was the deputy chief executive of the Hong Kong Monetary Authority from 1993 to 1998. Between 1989 and 1993, Dr. Sheng worked with the Financial Sector Development Department of The World Bank in Washington, DC. From 1976 to 1989, he held various positions at Bank Negara Malaysia, the Central Bank of Malaysia, including chief economist and assistant governor in charge of bank and insurance regulation. Dr. Sheng is the recipient of Hong Kong's Silver Bauhinia Star. He is a a chartered accountant, and holds a first class Honours degree in economics and doctor of law degree from the University of Bristol, United Kingdom. Presently he is on the advisory committee of CIMB as well.
Robert Kuok has formed many strategic alliances with various parties. With governments, he formed joint ventures to establish shipping businesses, and hotels, office buildings and convention centres. Thus, through business acumen, creativity and his valuable political connections, he has diversified into many important sectors of the economy. Apart from a multitude of enterprises in Malaysia, his companies have investments in many countries, including Singapore, Thailand, China, Fiji and Australia. Kuok controls the Shangri-La Hotels chain, Kerry Group, Perlis Plantations Bhd, South China Morning Post and many more companies.
In the NST: "It has been reported that the area has the potential to attract investments of up to RM47 billion with an initial investment amount of RM15 billion. ... Their experience, links, reputation and input is expected to help establish a zone that is on par, if not better than similar projects in the United Arab Emirates, India and China ... Musa, the former deputy prime minister, has held various posts at the international level. Samsudin is the former chief secretary to the government and is the chairman of the Employees Provident Fund Board and Investment Panel, while Kishu is best known for his textile business (Globe Silk Store). The 2,200 sq km IDR is dubbed the "project for all investors" and has been identified as the next growth area in Malaysia with potential investments in tourism, a financial centre, housing, medical facilities and education. It is estimated that within the next 20 years, the entire project has the potential of creating 800,000 jobs and the capacity to double the annual per capita income of the people to RM31,000 from RM15,000"
Why do I say the execution wheels are in motion? The presence of Andrew and Robert alone is the best move Badawi can make. The make or break for the IDR depends largely on foreign investors into the region. There are 3 groups of investors in the order of importance: HK, Singapore and Middle East. Many might be surprised why I would rank HK ahead of Singapore. Its the Macau factor!
If you look around the region over the last 3 years, the most exciting ventures were the highly successful redevelopment plans for Macau and the two IRs in Singapore. For Macau, the success of making the place into a gaming and entertainment center has exceeded the wildest of expectations. The IRs in Singapore has led to a strong uptick in high end property and new developments over the last 2 years in particular. When you are in the top 20 developers in Asia-Pacific, it will be very silly not to give the IDR a second look, after having witnessed the remarkable successes in Macau and Singapore. I will find it very shocking if Capitaland, Cheung Kong, Lippo, SHK, Keppel Land, Allgreen, etc... not making a footprint in IDR. Play the cards right, they rather be wrong than miss out. To top it all off, we have a much more outward looking and progressive Khazanah dealing the cards. Now execute well... please!
South Johor has a few things going for it:
a) very low cost of land
b) market differentiation away from Macau and Singapore's IRs
c) access to competitive labour
d) proximity to Singapore and a flow-through of visitors from the IRs
e) Air Asia's excellent coverage for air transportation intra-region
f) almost a blank canvas to start with
g) great potential for long term gradual development into 30-40 year plan
Despite the misgivings over the torrential floods in the southern region, the fact is the bulk of infrastructure is still not there, which give rise to planning to overcome the known obstacles. Lack of infra has been cited as a stumbling block but that is not that big an obstacle, in fact it will help that they can start with pcokets of development together with top international names as jv partners.
Dreams? Well, the appearance of Andrew and Robert will definitely open doors easily and ignite interest from top developers and investors from China and HK. Singapore being Singapore will try and jump ahead of the HKers.... queue man, queue... Already recent transactions by SP Setia indicate a significant jump in prices (yes, the land was in an already built up area, but still bears watching). UEM World has not revalue its land bank. What if Li Ka Shing buys 10 acres to develop a few hotels and condos? What if Disney decided to come in because Robert Kuok and Li Ka Shing are also coming in? A lot of IFs but it just takes one to start the ball rolling.
South Johor-Singapore can be big or can be bland. It could turn out to be positive like Kowloon-HK, or even Shenzhen-HK ... proximity yields a lot of benefits if handled properly. I think the Singapore government knows as well that it is to their advantage as well if South Johor prospers. One of the first thing Andrew and Robert will probably suggest to Badawi is "fast-track all FDIs applications to IDR", instead of a 3 or 6 month process, the process could be decentralised to a one-stop shop with nothing over 1 month.
How to play the South Johor situation? You now have a market that is very liquid. You need catalysts to move them. Research reports or the setting up of this influential committee are catalysts ... look for more land signings, joint ventures, FDIs into the region. You probably have to BUY & HOLD to get full value. As we are in the midst of liquidity driven rally, holding these shares might not be a bad idea anyway if you are bullish on the markets.
Current property players in South Johor - Asiatic has 6,000 acreage next to Senai airport. IOI Properties has a similar sized land bank also next to Senai airport. Johor Land has 1,500 acre along North-South highway. Crescendo Corp with 1,400 acre in Kota Tinggi distric (hmmm Kota Tinggi, not that good huh...). The others worth mentioning are KSL with 700 acre along Senai-Desaru highway and UM Land with 500 acre also next to Senai airport.
Of course thats not where the big fishes are located. They are the ones with excellent land bank within a 10km radius from the causeway. UEM World with 15,300 acre; Danga Bay Sdn Bhd with 1,400 acre; Gamuda with 1,200 acre; Tebrau with 1,012 acre; and Mulpha with 800 acre. I think if the execution wheels continue to turn, UEM World could be the best performing stock in 2007. Target? What if I say RM15!!!! But of course, a few more wheels need to turn for that to happen. But I would not be shocked at all if the stock reached that level this year.
1 comment:
RM15 for UEMWorld, Dali? I can believe that happening in say 3 years time, but within a year?
I guess I've still got a somewhat biased view when it comes to GLCs, especially those inherited from the Renong days. I visualise them as a bunch of lumbering behemoths, slow to act and slow to react.
Hypothetically, If you were to substitute UEM World with say Mah Sing (considering how fast Mah Sing's projects turnaround period is like), I'd say yeah, RM15 is possible in a year.
So with UEM World, even taking into account future earnings prospects, potential landbank development values, I'd say RM15 within a year is hard to see.
But that's just my humble opinion. I'm not a trained analyst so this is more of a layman's view.
I'll definitely be keeping an eye out on UEM World now though. It'd be fascinating if it does hit your target estimate. And if it does, I'll be kowtowing to you, "Teach me oh master!" :)
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