Ken Holdings mulls resort villas project in Penang

This article first appeared in The Edge Malaysia Weekly, on May 6, 2019 - May 12, 2019.

Tan says Ken Holdings is actively working on growing its recurring income stream. Photo by Annual Report

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KEN Holdings Bhd is mulling over plans to build resort villas on its two-acre beachfront land in Batu Ferringhi, Penang, sources say.

“The group is looking to build a resort comprising villas with private pools, something different from most of the hotel concepts in Batu Ferringhi. The timeline is still being finalised but the main aim is to help the group grow its recurring income,” says a source familiar with the plans.

“The land was originally earmarked for a property development but following the decision to generate recurring income, there was a plan to move into hospitality a few years back but the concept wasn’t finalised,” adds the source. “The hotel industry in Penang remains resilient despite increasing supply and Batu Feringghi continues to be a popular tourist spot. What is crucial for the company is to get its positioning and product right.”

Ken Holdings managing director Sam Tan confirms that the group is looking to “do something different in Penang” but declines to elaborate on the plans. He, however, affirms that the group is “actively working on growing its recurring income stream to ensure it builds a sustainable business”.

“We opened the doors to our first green corporate building, Menara KEN TTDI in Taman Tun (Dr Ismail, Kuala Lumpur), last year and that will help us grow our recurring income through leasing. We hope to derive over RM15 million annually. The occupancy rate has grown in the past few months to 70% from about 50% as at Dec 31 last year,” he tells The Edge.

Tan adds that although property development remains the group’s core business, there will be a strong focus on boosting its leasing of office and commercial spaces in Menara KEN TTDI to remain resilient in a challenging property market.

“We believe having a mix of revenue streams from rental and sale of properties will enable us to have sustainable income in the coming years. Strategies include continuing our efforts to develop better sales and leasing strategies to sell the remaining inventory of the group and strengthen our recurring income base to deliver consistent growth in the long term,” he says.

Menara KEN TTDI’s tenants range from business radio station BFM 89.9 and DKSH Global Corporate Services to co-working space Common Ground. One of Nestlé SA’s three global procurement hubs has taken up a 25,000 sq ft space. The building also houses an art gallery and a 523-seat fully integrated theatre, The Platform.

For FY2018, Ken Holdings saw its revenue drop 38% year on year to RM64 million and net profit halve to RM25 million, mainly due to the completion of KEN Rimba Condominium 1 during the first quarter of the financial year.

The group was sitting on cash and cash equivalents of RM16.7 million as at Dec 31, 2018, and its gearing remained low at 0.01 times. Net asset per share rose 7.2% y-o-y to RM1.79 compared with RM1.67 a year earlier.

According to its FY2018 annual report, apart from the two freehold parcels in Batu Ferringhi measuring a combined 2.53 acres, which had a net book value of RM5.671 million at the last valuation in 2005, Ken Holdings still has land to develop in various states. They include two freehold parcels totalling 4.95 acres in Bentong, Pahang, two freehold parcels in Klang measuring a total of 4.32 acres and five freehold parcels with a total size of slightly over 23 acres in Johor.

It is unclear what the group plans to do with its parcels — whether to develop properties to sell or to build its recurring income stream. However, the conscious shift to grow its recurring income is clear.

In the FY2018 annual report, executive chairman Datuk Kenny Tan — Tan’s father — said the group will “continue to further enhance its recurring income base to remain resilient in its performance in the coming year”.

Upcoming projects for the group include KEN Rimba in Shah Alam and KEN Kota Bharu — a mixed-use green development featuring 200 serviced apartments.

The stock ended last Thursday at 68 sen, giving it a market capitalisation of RM122 million. It was trading at a trailing price earnings of 5 times and a 62% discount to its net asset per share of RM1.79.

 

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