What does MBL (5152) MUAR BAN LEE GROUP BHD see in SYMLIFE (1538): SYMPHONY LIFE BHD?
THE apparent disharmony between directors and shareholders of Symphony Life Bhd (SLB) since the emergence of Muar Ban Lee Group Bhd (MBL) as its substantial shareholder in April has raised quite a few eyebrows lately.
Formerly known as Bolton Bhd, SLB is one of the oldest property developers in Malaysia. It started as Bolton Properties Ltd in 1964 before it was listed on the Kuala Lumpur Stock Exchange (now Bursa Malaysia) in 1973, and rebranded as SLB in 2013.
MBL, meanwhile, is a family-owned palm kernel expeller manufacturer that was founded in 1987, specialising in palm oil machinery and oil seed crushing machinery.
MBL was involved in the successful move to block the privatisation of Cycle & Carriage Bintang Bhd by the powerful Jardines group of Hong Kong last year.
Given the fact that the two companies are operating in different business sectors, one can’t help but wonder what value MBL sees in SLB.
According to SLB’s 2021 annual report, which was published on Bursa Malaysia on Aug 30, the group has weathered several economic downturns and delivered over 20,000 properties throughout the country.
Today, it has two ongoing projects, namely Kejora Industrial Park phase 3 in Kedah, and Union Suites @ Bandar Sunway in Selangor. The group also has 11 projects in the pipeline, including three each in Kedah, Kuala Lumpur and Selangor, as well as one each in Sabah and Kelantan.
In the chairman’s statement, Datuk Jasmy Ismail acknowledges that the Covid-19 pandemic and various forms of lockdown continue to affect the appetite for property, but pent-up demand remains strong among buyers.
He points out that the onus is on developers to supply the most appropriate products to the right target segment and at the right prices and locations.
“Our strategies include greater focus placed on meeting real market demand, that is supplying properties priced RM500,000 and below. The company will be leveraging on the Houzkey scheme in addition to our ‘Live It Own It’ scheme to drive property sales,” Jasmy writes.
He also stresses that technology shall serve as the catalyst and enabler for the ongoing transformation of SLB into a more dynamic, empowered organisation that is adaptable and nimble to respond to the present new normal and highly dynamic marketplace.
The Management Discussion and Analysis (MD&A) states that SLB had implemented a wide range of strategic measures to yield greater cost and operational efficiencies, including organisational and manpower restructuring. As a direct result of these efforts, operating costs decreased by 10% to RM43.8 million in the financial year ended March 31, 2021 (FY2021), down from RM48.7 million in FY2020.
The MD&A further says that the group also sought to leverage the low interest rate environment to refinance its borrowings. In FY2021, SLB brought down its finance costs by 20% to RM11.9 million.
Last October, SLB announced that its wholly-owned unit Prestige Capital Sdn Bhd was planning to sell six parcels of industrial development land in Ulu Langat, Selangor, to Perdana Park City Sdn Bhd for RM250 million, which represents more than two-thirds of the company’s market capitalisation.
The sale is expected to be concluded in FY2022, and is anticipated to not only significantly reduce SLB’s gearing ratio, but also contribute to the group’s revenue and earnings in FY2022.
According to the filing with Bursa Malaysia, the proposed disposal is estimated to result in a gain after tax of RM74.24 million for SLB. It will increase the group’s net assets per share to RM1.76 from RM1.62 as at March 31, 2020, and halve its net gearing ratio to 14% from 30% in FY2020.
SLB also highlights in the MD&A that moving forward, the group will be focusing on its landed developments, given that this category of property was more resilient in FY2021.
Therefore, the management has decided to defer the launch of Illi @ Cheras, a retail shops and service apartments project with a gross development value (GDV) of RM450 million, to FY2022.
Union Suites @ Bandar Sunway seems to be the key revenue contributor for SLB, generating RM102.8 million or 39% of the group’s revenue of RM261.2 million in FY2021.
Despite the pandemic, construction work at Union Suites @ Bandar Sunway saw rapid progress. As at March 31 this year, the project’s work-in-progress had reached 87%, while its take-up rate stood at 77% with a GDV of RM479 million. The project is scheduled for vacant possession delivery by the fourth quarter of this year.
It is not publicly known how much SLB’s total remaining GDV and potential total GDV are. But suffice it to say, among the 11 upcoming projects, the one that has caught the most attention is the yet-to-be-named Lembah Ledang project, which has an initial estimated GDV of RM5 billion and will cover a total of 19 acres in the Damansara Heights area, located next to Istana Negara. Once it is launched, SLB’s one-third share in the mega joint-venture will keep the group busy for at least another 10 years.
Another notable project slated for FY2022 is SLB’s potential participation in the development of a five-block luxury condominium with a GDV of RM1 billion, dubbed ORIC Gardens, at Open Road International Circuit (ORIC) and Integrated Resorts in Langkawi.
SLB had on April 28 signed a joint-development agreement with Open Road Asia Sdn Bhd (ORA), which is linked to Datuk David Goh. Earlier on March 31, a strategic partnership was inked between ORA and the Kedah state government via Permodalan Kedah Bhd for the development of ORIC and Integrated Resorts in Langkawi.
However, it should be noted that the ORIC project, which has an estimated GDV of RM1.3 billion, is still at the preliminary stage and subject to final due diligence. Besides, it also remains to be seen if the apparent discordance between the shareholders and directors will affect the chance of SLB participating in ORIC Gardens.
SLB owns a long list of properties across the country. A quick compilation shows the group has a total of 26 land titles or lot units, measuring a total of about 720 acres.
Quite astonishingly, in terms of net book value as at March 31, these properties were collectively worth over RM850 million. The most valuable properties include a 397-acre quarry land for extraction of rock reserves at Hulu Langat worth RM163 million, as well as a 1.78-acre commercial development in Jalan Prof Khoo Kay Kim in Petaling Jaya.
SLB is profitable; it made a pre-tax gain of RM74 million in its latest financial year. It has, however, almost RM400 million in borrowings.
Its share price has fallen to around 56 sen currently from a year-to-date peak of over 80 sen in April when MBL emerged as its controlling shareholder. Its market capitalisation is RM370 million as at Sept 17.
http://www.theedgemarkets.com/article/what-does-muar-ban-lee-see-symphony-life
