Bigger property play for TA

Bigger property play for TA

By ANGIE NG

TA ENTERPRISE Bhd, which is well known as a stockbroking and financial services group, wants to beef up its exposure to other more profitable ventures, especially property development and investment.

For the financial year ended Jan 31, 2006, stockbroking and financial services contributed 45% to group earnings while property made up 35%.

Another 20% of the earnings are from its offshore division that is involved in real estate investment of office buildings in Vancouver and Johannesburg, a hotel in Sydney and a stockbroking outfit in Hong Kong.

“We want people to know that TA Enterprise is more than a stockbroker and the headway made by the property division bodes well for the group’s plans to grow into a conglomerate with diverse and profitable business interests,” executive chairman Datin Alicia Tiah told StarBiz.

Tiah said while stockbroking was still a lucrative business, especially during a buoyant stock market, the cyclical nature of the market made it necessary for the group to diversify its earnings base to achieve greater financial stability.

Alcia Teoh, executive chairman of TA Enterprise, showing the Damansara Idaman show village
Given TA’s stockbroking clientele of mainly retail players, its stockbroking revenue is largely dependent on broking commissions.

“As such, the market turnover is a key earnings and value driver for the group. TA Enterprise's share price performance is likely to be highly correlated to the fortunes of the domestic stock exchange index (the KLCI),” an analyst with a local brokerage said.

Since the financial crisis of 1998, the management has deliberately diversified the group’s earnings to include property investment and development, which is set to account for nearly half of total group earnings in future.

Besides providing three sources of income from development, investment and management activities, there is also more scope for design creativity and value adding opportunities in the property business – an element that is missing in stockbroking.

Tiah’s passion for property development is driving the group’s aggressive inroads into the property sector to join the ranks of other leading industry players. The strategies include expanding its landbank and offering more creative products.

Last year saw TA Properties Sdn Bhd kicking off its aggressive drive to boost revenue and profit, including an active branding exercise of its property products.

The target is for the property division to grow by at least 20% to 25% a year.

Contribution from property has risen to 35% in the year ended Jan 31, 2006 from 10% a year ago.

The group’s target is for the property division to contribute at least 50% of the group’s overall income within the next two years.

According to Tiah, this would be achieved through greater marketing initiatives and strategic expansion into other growth areas in the Klang Valley, Penang and Johor.

“We have the financial muscle to build a bigger presence in the property sector by expanding our landbank into new growth markets. For a start, we are seriously looking at Penang to offer our brand of residences there,” she said.

In line with its aspiration to be a global property player, TA is also looking at venturing overseas, especially the strong growth markets of China, India and Vietnam.

A Citigroup research note said the next two to three years would be exciting for TA Enterprise's property division.

Besides the 2.25 acres of prime land in the KLCC area that have a potential gross development value of RM1.1bil, the group has another three acres in Jalan Bukit Bintang.

Starting next month, it is planning to launch about RM1bil worth of properties over the next 12 months.

“Given the favourable cost of its landbank, margins should be at a healthy 20% to 40%. Take-up rates should also be fairly decent given the prime location of these properties,” Citigroup noted.

Meanwhile, its stable of investment assets also provides a steady stream of rental income.

The prime real estate portfolio that comprises AAA-rated office buildings in downtown Vancouver and Johannesburg, The Radisson Plaza Hotel in Sydney, and the group’s corporate head office within a stone’s throw of the KLCC Twin Towers, have an estimated market value of more than RM1bil – almost double the current book value