This article first appeared in The Edge Malaysia Weekly on May 8, 2023 - May 14, 2023

AFTER reporting losses for three straight years, diversified group Berjaya Land Bhd (BLand) is targeting a return to profitability in the financial year ending June 30, 2023 (FY2023), bolstered by higher earnings from its number forecast operation (NFO) and a post-pandemic rebound in demand at its hotels and resorts as well as property developments.

The financial ramifications of the Covid-19 pandemic have been felt globally, and BLand has not escaped their impact. The group, which owns and operates the Berjaya and Taaras hotels and resorts, fell into the red in FY2020 as border closures and lockdowns forced people to stay at home and non-essential businesses such as NFO outlets and hotels to close.

It incurred a net loss of RM36.84 million in FY2020, compared with a net profit of RM154.08 million in FY2019. Its net loss widened to RM247.64 million in FY2021, but narrowed slightly to RM242.96 million in FY2022.

Group CEO Syed Ali Shahul Hameed, however, is confident BLand can turn around its fortunes in the current financial year, based on its performance in the first half of the year. Conditions are also ripe to put its expansion plans into action.

BLand, an 80.92%-owned subsidiary of tycoon Tan Sri Vincent Tan Chee Yioun’s flagship Berjaya Corp Bhd (BCorp), has bounced back from the impact of Covid-19, posting a net profit of RM92.84 million in the six months ended Dec 31, 2022 (1HFY2023), in a reversal from a net loss of RM98.23 million a year earlier. Revenue grew 42.2% year on year to RM3.4 billion in 1HFY2023.

BLand operates primarily through four segments, namely its NFO, motor vehicle dealership, hotels and resorts, and property investment and development division.

BLand’s biggest source of operating profit is the NFO segment, via its 40.75% equity interest in associate Sports Toto Bhd. In 1HFY2023, the latter contributed RM209.49 million or 85% to BLand’s operating profit of RM246.67 million, a 249% jump from RM59.97 million in 1HFY2022.

The property investment and development division’s operating profit came in at RM26.27 million — accounting for 11% of the group’s total operating profit — followed by the motor vehicle dealership business, which accounted for 7% at RM17.64 million.

There are several challenges facing the NFO sector, including potentially unfavourable policies following the upcoming state elections in Selangor, Penang and Negeri Sembilan, where about a third of the total NFO outlets in the country are located. Also, Sports Toto and other number forecast operators have to deal with stiff competition from online and illegal gaming operations. Only time will tell how things will unfold in the sector.

Despite the pandemic putting its property launches on hold, Syed Ali sees better prospects for BLand’s property development business on the back of an improving housing market. The group has big plans for this division as it plans to launch four projects with a total gross development value (GDV) of RM2.3 billion this year, the 51-year-old group CEO tells The Edge in an interview.

One of them will be a serviced apartment development situated next to Berjaya Times Square shopping mall in Jalan Imbi, Kuala Lumpur. Dubbed Lot 2000, it will offer 629 residential units. “This luxury residential development in the heart of KL city centre is constructed by Berjaya Construction Bhd, a  wholly-owned subsidiary of BLand,” says Syed Ali.

BLand is also looking to launch a condominium development called KM2 in Bukit Jalil, Kuala Lumpur. “We plan to launch the first of four phases of KM2, which is sited on 12.24 acres of elevated land, this year. For this proposed development, we are focusing on a lifestyle living concept, providing serenity and tranquillity in an urban landscape and have been granted a development order (DO) to build condominium units priced between RM800,000 and RM1 million,” he says.

Also planned are 518 condominium units at Berjaya Park in Shah Alam this year. Dubbed Bayu Timur, the project sits on 8.51 acres of land overlooking the Bukit Kemuning Golf & Country Resort.

BLand will also roll out its second affordable housing project this year, after Residensi Lanai in Bukit Jalil was launched in 2017. Dubbed Residensi Azalea, the proposed project will comprise 402 affordable apartment units in Subang Heights under the Selangor government’s Rumah Selangorku housing scheme, where each unit will cost between RM230,000 and RM280,000 and have a built-up area of 900 sq ft.

“Three years after the global pandemic began, the property market is definitely showing significant improvement and the recovery has been quick. If you look at the market trend now, properties priced RM500,000 and below are doing very well,” says Syed Ali.

“As for mid-range properties priced between RM800,000 and RM1 million, there is increased demand for those in strategic locations such as Bukit Jalil as it is only 20 minutes’ drive from the heart of Kuala Lumpur. So, I would say the property market is definitely up again, but the target market is different now.”

BLand has set a sales target of RM900 million to RM1 billion for 2023 and has projected a higher sales target for 2024. “Of course our aspiration is to always do more, but we need to be strategic and take into consideration current trends and future demand as buyers are now selective in investing their money in properties,” he says.

In Penang, the group is targeting to launch a project at the epicentre of the island featuring exclusive zero-lot bungalows and courtyard villas. “It is located at George Town’s most prestigious address. The design of the properties there will be the first of its kind and high-end,” says Syed Ali. This project is not part of the total GDV of RM2.3 billion for the year.

BLand, through Berjaya Construction, will also be involved in the construction of a 1,000-acre mixed-use development by its parent BCorp at Berjaya Hills in Bukit Tinggi, Pahang. “To be developed in phases, the development is expected to feature terraced houses, affordable homes, bungalows, resort and retirement homes, condominiums, a hospital and an international school,” he notes.

Syed Ali says BCorp is expected to kick off the development with an initial launch of 3,000 terraced houses that have a land area of 22ft by 70ft this year. “The DO has been obtained for Phase 1 of the development comprising the terraced houses. We expect to receive the building permit and the advertising permit and developer’s licence (APDL) in the next couple of months, which will allow us to advertise and commence property sales.”

He is also hopeful that the government will review the requirements for the Malaysia My Second Home (MM2H) programme, pointing out that it would help to attract foreign investors to the country. Last month, the Ministry of Tourism, Arts and Culture reportedly said the government had agreed to review the terms and conditions of MM2H following reports of a 90% decline in applicants due to its strict requirements.

“The easing of the overly strict conditions of the MM2H is very important for developers and will be good for our high-end properties, such as The Ritz-Carlton Residences in KL under BCorp, as it will eventually reduce the property overhang in the Klang Valley, which mostly comprises high-rise residential properties,” says Syed Ali.

“We expect more foreigners to invest in the country once MM2H is reviewed and liberalised. Our target markets are China, Hong Kong, Taiwan, Japan and South Korea.”

BLand is stepping up its investments in its hotels and resorts business this year to tap resurgent demand. It will also continue to look out for potential land acquisitions to boost its hospitality portfolio.

According to Syed Ali, the hospitality industry was hit hard during the pandemic. The group’s financial results released on Feb 23 showed that its hotels and resorts division had posted an operating loss of RM136,000 in 1HFY2023, although much lower than the operating loss of RM13.98 million recorded in 1HFY2022.

“Thankfully, the group’s  large hospitality portfolio has allowed the businesses to sustain themselves during this hardship. Now that tourism has bounced back, we are looking to renovate and refurbish our hotels and resorts and develop more attractions at Berjaya Hills,” he says.

Syed Ali notes that the group owns and operates 36 hotels and resorts locally and abroad, including in the UK, Iceland, Seychelles, Sri Lanka, Vietnam, the Philippines and Japan.

“Overall, our hotels and resorts are seeing a rebound, led by the 13 hotels in Iceland, which are recording occupancy rates of 90%. In fact, in terms of revenue, Iceland is doing better than Malaysia as the former enjoys higher room rates. That’s because the hotel business there is supported by international visitor arrivals from the US, Europe and now partly China, whereas for Malaysia, it is mainly supported by the local market. So, even though the occupancy rates of our hotels and resorts in Malaysia are high, only certain properties enjoy high yields,” he says.

“I am confident that we will return to operational profitability in FY2023, thanks to the reopening of borders and a pickup in domestic travel.”

The group will continue to expand the footprint of its hotels and resorts business.

Following the success of its maiden development of a Four Seasons Hotel and hotel residences in Kyoto, Japan, the group is now developing a Four Seasons Resort and private residences on a 100-acre tract in Okinawa.

“We have completed the earthworks and will begin substructure works in June or July. We expect the project to be completed in 2026,” says Syed Ali.

The group is also embarking on the development of a Four Seasons Hotel and hotel residences on a 22,188.34 sq m parcel in Yokohama, which is slated for completion in 2027.

“Our intention is to expand further in Japan. We will focus on developing ultra-luxury properties like the Four Seasons Hotels and Resorts, which are good to operate because they are always profitable. On top of that, we aim to develop luxury residences,” he says.

In December 2022, BCorp entered into a land sale and purchase reservation agreement with the City of Yokohama to acquire another six parcels of land measuring 20,977.15 sq m for ¥12.66 billion (RM408.82 million).

Syed Ali says BLand also plans to expand its hotel portfolio in Iceland. “Iceland as a tourist destination is still in its infancy as it only started developing its tourism sector about five to six years ago. The country is putting a lot of effort into promoting tourism. We currently have the Hilton hotel brand in our portfolio. We are moving towards [introducing] ultra-luxury brands in Iceland as well.”

Syed Ali says the group has no plans to raise funds from the capital market for now. “If we were to raise capital for our developments, it would only be via bank borrowings and/or internal funds.”

BLand had net debt of RM2.52 billion at end-December 2022, with a cash balance of RM814.77 million. Its total debt came to RM3.34 billion while its net gearing stood at 0.66 times.

Syed Ali believes the group’s gearing relative to its assets “is not that high”. “We are capable of generating our own funds because we have a lot of assets and landbank.” Its total assets stood at RM13.72 billion at end-December 2022.

BLand shares had risen 26.2% over the past 12 months to close at 26.5 sen last Wednesday, giving the group a market capitalisation of RM1.3 billion. Based on its net book value per share of 77 sen as at Dec 31, 2022, the stock is trading at a price-to-book value of 0.34 times. 

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