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KUALA LUMPUR: Budding property developer KYM Holdings Bhd is seeking fresh opportunities in the Klang Valley, a crucial and timely move to expand real estate income contribution to 30% of the company’s revenue within two years.
Managing director Datuk Raymond Chong Thin Choy said KYM, a packaging products manufacturer, is scouting for more land in Kuala Lumpur where it intends to develop high-end residential and commercial properties.
"We are still talking to potential parties [for land in Kuala Lumpur]," Chong told reporters at KYM's shareholders’ meeting yesterday (April 13). But he did not elaborate on the details, only indicating that KYM was open to the idea of outright land acquisitions, or forming joint ventures with landowners.
Property development made up less than 1% of KYM's revenue in financial year ended January 2010.
The expansion to Kuala Lumpur, Malaysia's property hotspot, is seen as a natural progression from KYM 's initial real estate operations in Perak's Teluk Rubiah enclave where it still has around 100 acres of leasehold land left following the sale of some 1,200 acres to Brazil-based mining firm Vale International S.A.
Vale plans to establish iron ore-processing operations, and a regional distribution centre for its products in Teluk Rubiah, a multi-billion ringgit initiative by the South American entity.
According to Chong, the remaining 100 acres, earmarked for a mixed development, has the potential to accommodate some 1,000 residential units over the next five years.
Last month, KYM had acquired a 41.36-acre leasehold tract in Perak's Kinta district for RM12 million from Idaman Bina Makmur Sdn Bhd. The site is earmarked for RM120 million worth of residential development comprising bungalows, terraced houses, condominiums and apartments.
Based on the gross development cost of RM90 million and the RM12 million paid for the land, the project is expected to generate a profit of RM18 million.
Datin Millie Lee Siew Kim, who is the spouse of KYM executive director Datuk Lim Kheng Yew, is the single largest shareholder in Idaman Bina Makmur with a 60% stake. Other major shareholders of Idaman Bina Makmur include Joseph Soon Teik Leong and KYM's Chong.
On a broader scale, it is worth noting that KYM is moving out of its comfort zone with planned forays into the construction, and iron ore-processing businesses to further expand its income base.
Chong said KYM would participate in construction jobs within Teluk Rubiah to support Vale's operations there. This will involve construction of roads, and factories, besides houses and hostels for workers.
"We are working very closely with them [Vale]," Chong said.
Vale intends to set up a pelletising plant in Teluk Rubiah to process iron ore into pellets as feedstock for steel production. The iron ore will be shipped from South America to Teluk Rubiah.
According to Vale's website, the mining company also plans to establish a distribution centre in Teluk Rubiah to enable it to have better access to Asian customers, considering the huge distance between South America and Asia.
Vale said the "Malaysia project" included a seaport with adequate depth to accommodate ships of 400,000 deadweight tonnes, and a handling capacity of up to 30 million tonnes of iron ore in the initial phase.
Capital expenditure for the initial phase is estimated at US$900 million (RM2.88 billion), including US$98 million to be spent in 2010. Operations are scheduled to begin in 1H2013.
According to KYM's Chong, Vale's operations will, however, only be confined within an estimated 500-acre area while the balance of 700 acres would serve as a buffer zone.
Construction of the facilities in Teluk Rubiah is expected to start in early 2011.
Going forward, Chong said KYM could capitalise on its commercial links with Vale to make an initial venture into the iron ore-processing business as a new source of income.
"We are looking at it," Chong said, adding that KYM and Vale had deliberated on the idea, which could add value to KYM's business.
