Thursday, July 7

CMS to unlock true value of Bandar Baru Samariang


KUCHING: Cahya Mata Sarawak Bhd’s (CMS) disposal of 500 acres land in Bandar Samariang is viewed as a strategic move as this may give rise to a net capital gain of over RM30 million for the group.

In addition, the Sentoria Group Bhd’s (Sentoria) proposed theme park is likely to add value to CMS’ remaining landbank and spur interest on its upcoming property project in Samariang.

Analyst Ng Sem Guan from RHB Research Institute Sdn Bhd (RHB Research) noted that last Friday, CMS’ wholly-owned subsidiary, Project Bandar Samariang, entered into two separate sale and purchase agreements (SPAs) with Sentoria to dispose two tracks of land in its Bandar Samariang township – 200 and 300 acres for RM17 million and RM30 million, respectively.

Sentoria will develop the first tract into ‘Borneo Samariang Resort City’, which will comprise of a water park, resorts, a centre for meetings, incentives conferences and events (MICE), a river cruise recreational center, a brands village, and a safari park. An adjoining 300 acres is earmarked for residential and commercial development.

“We welcome the land sale, which we had anticipated in our March 20, 2013 initiation report entitled, ‘Set to SCORE’. Prior to this disposal, CMS had 4,211 acres of remaining landbank in Bandar Samariang with a total book value of merely RM13 million.

“We believe the disposal will give rise to a net capital gain of more than RM30 million upon fulfilling the terms stipulated under the SPAs.

“More importantly, the transaction marks a milestone since Sentoria’s proposed theme park may enhance the valuation of CMS’ remaining landbank as well as spur interest on its upcoming Samariang Phase II,” Ng explained.

The analyst further said that the integrated township of Bandar Baru Samariang, with a variety of residential properties, a commercial centre and schools, is now home to some 25,000 residents.

It is located seven km from the Kuching city centre and within easy reach of the beaches of Damai and Santubong in Kuching.

However, Ng noted, Samariang’s properties, being situated in the north side of Kuching, had in the past been viewed less favourably by buyers vs properties located in the south of the city.

Additionally, the analyst explained that the northern district houses the state’s administrative offices and the majority of the community is Malay.

The perception is slowly turning positive, especially with property prices in the south of Kuching becoming beyond affordable for the average homebuyer.

Thus, he added, potential house buyers may be looking for alternative areas. Furthermore, the completion of the road widening and upgrading works at Jalan Sultan Tengah at end-2010 has helped to ease traffic congestion to and from Bandar Baru Samariang.

Ng enthused that the township’s accessibility has also been radically transformed at end-2012 following the completion of the Federal Administrative Centre road which linked it directly to the Sarawak River toll bridge and to the newly-built loop road running north-south through it.

The analyst outlined, a revised master plan for the entire Bandar Baru Samariang has been approved and this has enabled development plans for the second phase to commence. To date, works have commenced on an industrial park with a total land area of 130 acres. A 275-acre of adjoining land has been sold, primarily for developing residential housing.

The last milestone before the recent land sale was reached on January 14, 2013, when retailer Mydin signed a long-term lease agreement with CMS to set up a hypermarket in Bandar Baru Samariang.

“We view the move positively as hypermarkets are always a crowd-pulling factor for any property development. This is in addition to CMS’ own plans to develop other parcels of land into schools, shoplots, public amenities, housing and commercial properties.

“Meanwhile, management estimates a total gross development value (GDV) of RM474 million from developing 155 acres of Bandar Baru Samariang until 2018. Considering this project has exceeded its critical mass and its total book value of mere RM13 million (based on 2012 annual report), we expect the residential and commercial projects to enjoy an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of up to mid-teens and twenties respectively,” Ng elaborated.

“We make no changes to our projection as the land disposal in Bandar Samariang has been largely accounted for in our financial model – at RM20 million each for financial year 2013 (FY13) and FY14. Moreover, the timing of recognition from this disposal remains uncertain.

“That said, we credit management for continuously creating value for the group’s property division,” the analyst concluded.