Highlight Daiman remains focused on mass residential market

Highlight Daiman remains focused on mass residential market
Business & Markets 2013
Written by Shalini Kumar of theedgemalaysia.com
Monday, 10 June 2013 16:47


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Johor-based property group DAIMAN DEVELOPMENT BHD [] plans to maintain its focus in the mass residential market as the strategy has proven itself in good and bad times.

“Additionally, we believe that our current landbank is best served to meet the housing needs of most Malaysians, and Johoreans in particular, so that the general populace can have a roof over their heads,” says Daiman’s executive director and chief financial officer Eddie Chan in an email interview with The Edge.

Daiman, which is 51% owned by Singaporean Tay Thiam Song, started out in Johor Baru with a property project in Kota Tinggi some 40 years ago and has since grown to become a group with RM1 billion in net assets and a landbank of 2,000 acres in and around Iskandar Malaysia, he adds.

The group is best known for developing Johor Jaya, located on the outskirts of Johor Baru. One of the largest townships in Johor Baru, it was first developed in the 1980s.

“Daiman is one of the leading property developers in South Johor and is a household name among Johoreans. Daiman remains predominantly a Johor Baru property developer and is here to stay,” he says.

Its ongoing projects include Zone 5A at Taman Gaya, comprising two-storey cluster houses and semi-detached units with a gross development value (GDV) of RM127 million, as well as Zone 4A4 and 4A5 at Taman Daiman Jaya, Kota Tinggi which is a residential development with a GDV of RM40 million.

Daiman has projects with a GDV of approximately RM364 million planned for the next 12 to 24 months.

“We have not made any acquisitions recently but purchased Menara Landmark for about RM100 million in 2011.We purchased the commercial development as part of the group’s shift to balance its portfolio of businesses and to grow its asset value,” he adds.

Menara Landmark, located within Flagship A of Iskandar Malaysia, comprises an office tower, a retail podium and an incomplete hotel. While work on the office tower and the conversion of the retail podium to medical suites has been completed, the hotel will be ready by year’s end.

“The hotel is to be managed by Hilton under the brand name ‘DoubleTree by Hilton’, and is scheduled to be operational in mid-2014. We expect this property to contribute significantly to the group’s revenue from 2014 onwards,” Chan says.

Aside from property development, the group has diversified into property investment, sports and recreation facilities, trading and leisure and recreational activities. It has an 11.6% stake in CapitaLand China Value Housing Fund, which has investments in property development in Guangdong and Shanghai.

“The group also has a minority interest in CIMB’s Australia Office Trust Fund, which invests in four Grade A CBD office PROPERTIES [] in Melbourne, Brisbane and Canberra,” says Chan.

While Daiman’s stock is usually thinly traded, it has been caught up in the wave of investment in Iskandar-linked companies. Its share price has surged upwards since April, hitting a 52-week intra-day high of RM2.99, the highest since July 1997.

Hwang DBS Vickers Research issued a report on Daiman on April 4, valuing it at RM4 per share. The report highlighted the fact that Daiman’s 2,286 acres of Johor landbank carried an average historical cost of RM5.90 psf, significantly lower than the market price, which has appreciated steeply over the past three years, along with the rising interest in Iskandar Malaysia.

For the nine months ended March 31, 2013, Daiman recorded a net profit of RM53 million, 86% higher than the RM28.5 million it posted in the previous corresponding period. Revenue was also higher at RM143.5 million, compared with RM117.4 million a year ago.

According to the notes accompanying the financial statements, the gains come from higher property sales while higher rental income from its property investment division also contributed to the increase in revenue.

According to Hwang DBS analyst Quah He Wei, most of the gains seen thus far for the current financial year has come from the group’s investment securities. In his April report, he notes that Daiman’s portfolio investment is valued at about RM170 million.

He says the group is still one of the cheapest pure Iskandar plays for investors, despite its growth prospects and strong dividend track record.

“Over the past four years, Daiman has paid out between 33% and 68% in dividends to its shareholders. I think there is a growing awareness about this group but it’s still trading at a deep discount compared to its Iskandar peers — only 0.3 times price to RNAV and 0.4 times price-to-book value versus its peers’ 1.2 times — and it’s one of the few that has good value,” he explains.

Quah adds that Daiman’s strategy of focusing on “bread and butter” housing also bodes well for the property developer, given the increase in property prices in Iskandar Malaysia.

This article first appeared in The Edge Weekly, on June 3, 2013.