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Highest return on equity over three years
Property: KSL Holdings
by Kathy Fong
Earnings to withstand softer market
Low-profile KSL Holdings Bhd is probably not the first name that comes to mind when talking about property developers in Malaysia. Nonetheless, in terms of earnings and return on equity (ROE), the Johor-based developer has outshone many of its peers.
KSL’s earnings have been on an upward trajectory in the past three years despite hitting a speed bump in its financial year ended Dec 31, 2015 (FY2015), as the domestic property market cooled. Still, its annual profit of RM266.1 million that year was the second highest that KSL had posted since its listing in 2002.
The developer achieved a record high net profit of RM342.3 million on revenue of RM801 million in FY2014, thanks to brisk property sales in Johor and steadily rising recurring income from its shopping mall and hotel, KSL City Mall and KSL Resort, in Johor Baru.
Pre-tax profit grew at a three-year compound average growth rate of 25%, from RM173 million in FY2012 to RM338.55 million in FY2015, although this was a drop from the RM431.8 million booked in FY2014.
Its impressive earnings put KSL among The Edge Billion Ringgit Club members with outstanding ROE in the property sector.
Shareholders of KSL enjoyed double-digit ROE of between 12.3% and 23.7% from FY2012 to FY2015 with a weighted three-year average of about 17%.
Given the sharp rise in its earnings, KSL resumed dividend payments in FY2014 after a three-year hiatus. It declared a gross dividend per share of 10 sen in FY2014 and two sen in FY2015.
With a massive land bank in Iskandar Malaysia and the second-tier cities of Johor, such as Muar and Kluang, KSL was riding high when the property sector was booming in the southern state.
It also has township developments in Klang, Selangor.
In 2010, KSL hogged the limelight in the investing fraternity when Templeton Emerging Markets Group took up a 5% stake in it through a placement. Templeton Asset Management Ltd executive chairman Mark Mobius said at the time that KSL was a leading Malaysian property developer with a strong track record and an experienced management team. “We are impressed with KSL’s diversified property projects and business model,” he noted in a statement.
Before its peers and others from outside the property industry had jumped on the shopping mall bandwagon for rental income, KSL had already opened its first mall — KSL City Mall — in JB in December 2010. Running a mall can be a challenge but KSL seems to have found the right formula. Singaporean and local tourists in Johor Baru are currently the captive market for KSL City Mall and KSL Resort.
Its mall and hotel division is a significant revenue contributor at present. In FY2015, its property investment segment generated revenue of RM157.9 million, which accounted for 23% of KSL’s total revenue of RM680 million, and a pre-tax profit of RM134.1 million, which included gains on fair value adjustment of RM56.1 million. Investment analysts and fund managers opine that the rental income from the mall and hotel will act as a cushion for KSL as property sales slow down.
In fact, the company is growing its investment property portfolio following the success of KSL City Mall and KSL Resort. It launched the KSL City Mall @ Klang project late last year. This is poised to be the biggest mall in Klang, almost three times the size of its predecessor in Johor Baru.
KSL’s major township developments include Taman Nusa Bestari, Taman Bestari Indah, Taman Kempas Indah and Taman Daya in Johor, as well as Bandar Bestari in Klang.