UEM VS TEBRAU

-article from STAR NEWSPAPER

The SJER has been earmarked as the focus area for development in the southern region under the Ninth Malaysia Plan.

While companies such as UEM World, MMC, Gamuda and Tebrau Teguh have hogged the limelight on the sheer potential of the development of South Johor

THE thrill over the South Johor Economic Region (SJER) appears to be almost palpable. The notion that there’s potential bursting within that massive development plans for construction and property companies is hard to miss. Harder to ignore is the fact that construction company UEM World Bhd’s share price has fared spectacularly on the back of such potential.

A major spot in southern Johor earmarked for development is Nusajaya. This 9,729ha land has turned into a major focus following the unveiling of the Ninth Malaysian Plan (9MP).

Essentially, some RM12.2bil has been allocated to develop the SJER(with Khazanah Nasional Bhd given a mandate to act as a planner and co-ordinator.) , and this will go towards building up Nusajaya, the Danga Bay waterfront, a transport hub and a high-speed rail link connecting Johor Baru to Kuala Lumpur.

UEM World owns 6,480ha, known as Bandar Nusajaya, which will house Johor's new administrative centre as well as several universities, a theme park, industrial estates and residential developments.

Most companies with either undeveloped land or ports in this sweet spot of Johor, such as Tebrau Teguh Bhd, MMC Corp Bhd and Gamuda Bhd have also experienced renewed activity in their shares.

Khazanah has got many companies under its umbrella. Some of these companies will be involved in the development of the projects in Johor Bahru and South Johor. Certainly, one of the resources that Khazanah has is through Prolink or UEM, the ownership of Nusajaya, the new growth center within South Johor. They will have to think of and be creative on other things as well. But they are taking the lead as the corporate vehicle that provides the private sector participation in this development. While the planning and authority are still vested with the government, but with the joint chairmanship of the commission by the Federal and the Prime Minister, Menteri Besar (the Chief Minister), Khazanah will become the private sector partner to coordinate this investment.

Upon completion of the development in the next five to seven years, the SJER would expand the services sector beyond its current concentration in the Klang Valley.

~about Tebrau~

According to an report by UOB-Kay Hian titled "Emergence of a Super-Cycle Performer" which highlights Johor Corridor stocks, Tebrau is worth RM1.67 (based on a revised net asset value of RM28 psf) per share over a 12-month period.
The report notes that a recent transaction of commercial land in Johor Bahru was done at RM110 psf, without specifying any particular sale. It also points out that the state government is asking for RM380 million or RM221 psf from the Federal government for 16ha of land in Bukit Chagar, Johor Baru.
According to UOB, these put current market values significantly above Tebrau Teguh's book value of RM13.40 psf. Fronting the sea allows Tebrau to price whatever development it has on the land at a premium. UOB says Tebrau is reviewing its master plan and will shift its focus from medium-cost residential development to high-end products.
Of course, these remain largely possibilities for now. Tebrau is not a company with an illustrious resumé of development projects.
"By themselves they have a limited track record. They've only developed one parcel on their own with low to low-end housing," says the valuer, who expects a fair amount of reclamation works to be done on the land, being located by the river banks.
Still, there's no stopping Tebrau from going into joint ventures with experienced partners. It could certainly use a partner with deeper pockets to fund projects.

------------ Just a reminder of things to come------