KSL replicates Mid Valley concept

KSL replicates Mid Valley concept

By THE EDGE

KSL Holdings Bhd is developing a hotel and shopping centre project in Johor Bahru that replicates the Mid Valley Megamall concept and will have a gross development value (GDV) of RM180 million.

The project, called KSL City, is expected to contribute up to 30% to KSL's annual revenue upon completion in 2010, executive director Ku Tien Sek said.

The Johor-based property is at present identifying suitable operators to manage the proposed 600-room hotel and anchor tenants for the five-storey shopping centre.

Speaking to analysts and fund managers here last Friday, Ku said the company was confident the development would draw tourists visiting Singapore's integrated resort and theme park as it offered a much more affordable hotel stay and shopping experience.

"Hotel rates in Singapore in 2010 could be in the region of S$400 to S$500 (RM898 to RM1,123) per night. Our two-block hotel, on the other hand, is divided into three-star and budget rooms, priced around RM150 and RM100 per night respectively.

"We will also offer shuttle services for our guests who wish to travel to the island resort and theme park in Singapore, which makes the stay at our hotel worthwhile for budget travellers and families," he said.

Ku said the company expected to cater to foreign and domestic tourists with its reasonably priced hotel rooms and the convenience of shopping at the mall, based on the successful Mid Valley business model.

On KSL's property development business, Ku said it would continue to launch commercial and residential properties this year and in 2008, and was targeting a 10% growth in net profit from property sales this year.

He said the company was targeting some RM110 million in net profit this year, including RM40 million from the extraordinary gains from the compensation for the compulsory government acquisition of part of its Taman Bestari Indah project for the Senai-Desaru Highway.

"We are also targeting a 10% growth in net profit from sales in 2008, meaning a 10% improvement from RM70 million this year," Ku said.

The government acquired 28ha from KSL for the highway, and the total compensation of RM77.4 million covers lost sales and construction cost.

KSL now has three flagship projects, namely, Taman Nusa Bestari in Skudai, and Taman Bestari Indah and Taman Kempas Indah, both in Tebrau, with a combined GDV of RM3 billion.

It is launching its Pandan Commercial Centre which has a GDV of RM31 million in the fourth quarter of this year, and will hand over the Giant Hypermarket situated at Pusat Perdagangan Muar (PPM) to the hypermart operator on a 15-year RM60 million lease next month.

"We bought the land at PPM at around RM3 per sq ft (psf), and the current market value (including the building) is around RM100psf. It makes more sense to lease out the building as over 15 years it translates into higher rental value," he said, adding that the PPM project launched earlier this year had a remaining GDV of RM390 million.

Going forward, KSL is banking on the potential of the Iskandar Development Region (IDR) where it has about 405ha, which is about half of its total landbank in Johor.

Ku said the company was also optimistic that sales for its residential and commercial properties would pick up this year after a sluggish 2006, especially with the buzz over the IDR and the waiver of real property gains tax that took effect in April this year.

For the financial year ended Dec 31, 2006, KSL posted a lower net profit of RM67.75 million compared with RM76.23 million the previous year due to lower sales. Ku said sales have started picking since early this.

While KSL's 1Q2007 net profit surged almost 200% year-on-year to RM54.9 million on the back of RM103.3 million revenue, this included the RM58 million compensation received from the government.