By THE EDGE
KUALA LUMPUR: Land prices in Nusajaya in the Iskandar Development Region may double in the next two years, making UEM World Bhd a direct beneficiary, said Credit Suisse.
“Coupled with South Johor Economic Region’s (SJER) proximity to rapidly growing Singapore, which has limited land and the wide gap between their land prices, we believe land prices in Nusajaya can only head up.
“They have already doubled from RM7 psf to RM15 psf in the past one year without much real development, and now with the Middle East investors coming in to quicken the pace of development, it is not unrealistic for land prices to double in another two years, which is the average price appreciation in other Asian special economic zones.
“This would bring land prices to the RM31 psf in our RNAV of RM6 per share for UEM,” Credit Suisse said in a report after taking UEM World’s senior director of corporate development on a non-deal roadshow to the United States and meeting 20 of its clients in San Francisco, Boston, and New York from Oct 22-26.
“While implementation of the SJER might not be clear-cut due to politics and culture, (government investment arm and UEM World major shareholder) Khazanah (Nasional Bhd) is devoting its efforts to develop the SJER and is working with Singapore for mutual benefit,” Credit Suisse said, maintaining UEM World as an outperform.
It said despite an absence of positive news flow from UEM World, the senior director assured clients that negotiations were progressing well and two major announcements were a possibility over the next two to three months: joint ventures between UEM and Middle Eastern investors to develop its land in Nusajaya, and the tier one theme park operator in Nusajaya.
On the latter, Credit Suisse said The Edge weekly had reported that Walt Disney Company had expressed its seriousness to build a theme park on a 200ha site in Nusajaya and had specified its requirements.
It said many clients had pointed out that the healthcare division was out of place, and that UEM World had had a poor track record overseas; hence, UEM World should streamline its group structure to be more focused on its property development in Nusajaya.
Credit Suisse said the UEM World official responded that it planned to keep the healthcare division and build up its non-concession business, which has better margins.
“UEM plans to spend RM400 million to expand its cement capacity to meet demand from the Iskandar Development Region by 2010, and another RM1.5 billion over the next three years to fund its property development in Nusajaya and acquire land in the Klang Valley,” it said.