UEM Land

Any signs of improvements in UEM Land’s future earnings due to good demands for its properties in Nusajaya, Johor could lead to an upward re raring for the stock.

Foreign shareholding UEM Landat 15% is still lower than the Malaysian market’s 23%. This essentially minimizes the risk of a substantial sell down by foreign investors in the property stock.

Low foreign shareholdings attributed the yet to appreciate the full potential of Nusajaya, the benefits of warmer of Malaysia-Singapore ties and a lack of foreign broker coverage (Oct 2012). Expect to see a pick up in foreign interest as Nusajaya begins to gain traction.

UEM Land, the largest landowner in Nusajaya is likely to be the prime beneficiary of latent demand.

Meanwhile Ascendas, a Singaporegovernment-linked firm has entered into a joint venture with a unit of Malaysia's UEM Landto develop a technology park in an economic zone that the Malaysian government has been promoting aggressively.

The 519-acre (210-hectare) technology park in IskandarMalaysia, with a projected investment value of S$1.5 billion ($1.23 billion), will cater to businesses in electronics, pharmaceuticals, medical devices, food processing and precision engineering.

The potential entry of Singaporedevelopers could further underpin confidence in Singapore buyers and continue to drive demand upwards.

Ascendas, a developer and manager of industrial properties across Asia, is a unit of Jurong Town Corp, a Singapore government body. UEM's main shareholder is Malaysian state investor Khazanah Bhd.

Malaysia has been trying to woo companies to Iskandar, an economic zone in the southern state of Johor that is connected to Singapore by two bridges.

KLCCP/KLCC REIT

KLCC Property Holdings Bhd is considering the possibility of injecting its assets worth over rm12 billion – including the iconic Petronas Twin Towersoffice and Suri KLCC shopping mall – into a REIT or business trust to maximize shareholder value.

It is still being looked at and expect it to happen only six to nine months from Oct 2012 down the road.

As at June 30, 2012 KLCCP net asset per share stood at rm7.01.

KLCCP would see a re rating catalyst should it decide to embark on a REIT.

The decision if it happens would also likely create a new benchmark forMalaysia’s REIT. This was given the size of KLCC Prop’s assets which are at least double the largest REIT in the Malaysian market currently (Oct 2012).

It had appreciated 42% over four months from the rm4.31 to rm6.12 after the announcement of the company’s intent to explore a better corporate structure.

Petronas owns 52.59% of KLCC Prop, with the EPF being the second larges shareholder.

The EPF is the net buyer of KLCC Prop for the past four months prior to Oct 2012. The EPF’s direct and deemed holdings rose to 9.1% from 8.96% between June 28 and Oct 11 2012.

Besides a REIT structure, KLCC Prop can also consider adopting a business trust structure. This was after PM Najib proposed during the tabling of Budget 2013 on Sept 28 2012 that the transfer of any business, asset and real estate to a business trust be exempted from stamp duty and real property gain tax at the early stage of establishment of the business trust. These incentives take effect Jan 1, 2013.

Like REITs, business trust generally commit to paying regular dividends. Business trusts, however are able to pay dividends from its cash flow even if it makes zero profits and as such are generally deemed as a higher tax risk relative to REITs.

That business trusts are able to have a higher amount of assets under development in its portfolio, compared with a ceiling of 10% of REITs, makes business trusts a better structure for businesses with strong cash flow but have high capex needs.