Malton Group of Companies
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Transcript of Malton Group of Companies
1. Introduction.
Malton Group comprises mainly the Khuan Group, Bukit Rimau and Domain Group.
Khuan Choo Group started its construction and property development businesses in 1980 and launched its
maiden property development project, Kuchai Business Centre, comprising 31 units of 5-storey shop office
in 1992 under Khuan Choo realty Sdn Berhad. Since then, it has successfully completed several projects
ranging from residential houses and condominiums to high-rise office buildings in the Klang Valley.
1.1 Company back ground
Bukit Rimau Development Sdn Bhd is the developer of the integrated self-contained Bukit Rimau Township
spanning over 358 acres of development land in Shah Alam neighboring the Kota Kemuning Township. The
development is strategically located in the vicinity of many major fast growing areas in the Klang Valley
such as Shah Alam, Subang Jaya, Bandar Sunway and Klang. With its innovative resort lifestyle concept, the
project has received consistent support and high take-up rate since its first launch.
Domain Group carries out construction and project management activities. Domain Resources Sdn Bhd, the
holding company, has been the project manager for various housing projects under Bank Negara Malaysia’s
“Tabung Pusingan Perumahan Terbengkalai” and “Tabung Pusingan Perumahan Kos Rendah” schemes since
1991.
Under the schemes, the group has successfully rehabilitated and completed more than 12,700 units of
properties in Klang Valley, Penang, Johor and Melaka. Apart from that, the group has also undertaken many
construction projects awarded by multinational corporations such as Carrefour Hypermarket, Pacific Dunlop
Group, Robert Bosch Pte Ltd, Tesco Hypermarket etc.
In 2002, Khuan Choo Group, Domain Group and Bukit Rimau Development were injected into Gadek
Capital Berhad, culminating in its re-listing on the Main Board of Bursa Malaysia. On 20 February 2002, it
assumed the present name, Malton Berhad.
1.2 Type of Business / Business Operation
Malton group of companies has two major divisions which has diversified business interests. One division
looks at property development while the other focuses on Construction and Project Management.
1.3) Property Development Division
Malton Berhad is a reputable property developer in Malaysia. The Group has established a solid presence in
the local property sector having completed more than RM2 billion worth of development projects in the
country.
Over the years, this Division has successfully launched and completed several residential development
projects mainly in the Klang Valley. Notable developments are 358-acre Bukit Rimau township comprising
bungalows, semi-dees, superlink homes, zero-lots, cluster homes and shop offices, luxurious apartments Vila
Mutiara in Bangsar, Li Villas II condominiums, Pearl Villas in Section 16 Petaling Jaya, Mutiara Puchong
and Mutiara Indah mixed residential developments in the well-established and matured Puchong township
and the novel and luxurious Amaya Saujana service apartments in Saujana Subang.
Apart from residential developments, the Property Development Division has also successfully undertaken
various commercial development projects in the Klang Valley including Kuchai Business Centre, Seri
Kembangan Commercial Centre and Menara Uni.Asia in the financial district along Jalan Sultan Ismail. The
23-storey Menara Uni.Asia is one of the prominent cityscapes in Kuala Lumpur which was conceptualised
and designed by the renowned Japanese architect, Kenzo Tange.
Riding on its proven track record, the Property Development Division has continued to achieve high take up
rate for its development projects. Their product offerings which are differentiated with innovative lifestyle
concepts and high consumer standard have been well received in the market. Current and upcoming
development projects include residential, commercial, retail and mixed use developments located mainly in
the high growth areas of Klang Valley, Penang and Johor.
1.4) Construction & Project Management Division
The Construction & Project Management Division offers integrated services ranging from design and
conceptualisation, feasibility studies, development management to construction works for both commercial
and residential projects.
The Group has completed several construction projects including high rise buildings, shopping malls,
highway interchange, aircraft engineering complex and residential townships. This Division also has a strong
track record in project management having successfully rehabilitated and completed various abandoned
housing and low cost development projects worth more than RM500 million contract value under Bank
Negara Malaysia's "Tabung Pusingan Perumahan Terbengkalai" and "Tabung Pusingan Perumahan Kos
Rendah" schemes in Klang Valley, Penang, Johor and Melaka. We have also carried out other large scale
private development management projects such as Pavilion Kuala Lumpur Project, an integrated mixed-use
urban commercial development which comprises Pavilion Kuala Lumpur Mall, one of Malaysia's premier
shopping centre, Pavilion Tower, a 20-storey office building and two blocks of luxury serviced apartments
known as Pavilion Residences.
To-date, this Division has managed and completed projects with contract value worth more than RM2
billion. Leveraging on its strong and wide technical expertise and experience, the Construction and Project
Management Division will continue to bid for and secure new contracts to enhance its order book.
2) CORPORATE STRUCTURE
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3. FINANCIAL REVIEW from the Malton Annual report 2011
This statement of financial position is derived from the published Malton Annual Report 2011.
The Group achieved a record-high profit during the financial year under review. Pre-tax profit jumped
174.3% to RM98.2 million from RM35.8 million reported previously while profit after tax soared 229.0% to
RM72.7 million from RM22.1 million reported in 2010. The Group’s revenue registered an increase of
33.3% to RM462.4 million as compared to RM346.9 million reported previously with major contribution
from the property development division. This division achieved higher revenue from the advanced
construction progress of our on-going projects and higher sales achieved from new projects launched during
the year. Revenue
from construction and project management division also improved during the financial year due to the
commencement of construction works at Jaya Shopping Centre. The strong performance in the Group’s
earnings was mainly driven by higher sales value and better margin achieved by their development projects.
The value engineering exercise carried out across our development projects has also contributed to the
improved margin. In the current financial year, the Group also recognized its full year share of results in
Austin Heights Sdn Bhd, an associated company, amounting to RM4.1 million while the Group also shared
losses in an associated company acquired in July 2010, Inai Berkat Sdn Bhd, for the amount of RM3.6
million arising mainly from the recognition of notional interest charges in its financial statements in
compliance with Financial Reporting Standard 139.
DIVIDENDS
The Board of Directors has proposed a final dividend of 0.85% less income tax and a final tax exempt
dividend of 1.15% in respect of the financial year ended 30 June 2011.
3.1 Financial Statement for two years
Statement of Balance Sheet as of 30th June 2011 for Malton Group of Companies
Statement of Balance Sheet as of 30th June 2011 for Malton Group of Companies
2011 2010RM'000 RM'000
ASSETS
Non-current assetsProperty, plant and equipment 10,554 18,822Investment properties 43,696 21,645Land held for property development 191,899 133,535Investment in subsidiary companies ₋ ₋Investment in a associated companies 22,712 22,175Other investments 1,589 1,456Deferred tax assets 5,131 4,439Other receivable 20,775 8,000
Total Non-current Assets 296,356 210,072
Current Assets
Property development costs 196,779 214,726Inventories 39,343 61,558Trade receivables 94,124 68,459Other recevables and prepaid expenses 45,301 51,438Tax recoverable 5,007 570Accrued billings 56,862 61,341Amount due from contract customers 1,179 ₋Amount owing by subsidiary companies ₋ ₋Fixed deposits with licensed banks 17,260 3,961Cash and bank balances 207,155 61,069
Total Current Assets 663,010 523,122
Total Assets 959,366 733,194
Equity and Liabilities
Capital and ReserveIssued capital 348,353 348,353Reserves 160,776 91,356
Equity attributable to owners of the Company 509,129 439,709
Non-controlling interests ₋ ₋
Total equity 509,129 439,709
Non current liabilities
Bank borrowings - non current portion 47,395 63,149Hire-purchase payables - non current portion 2,014 362Deferred tax liabilities 55 55
Total Non-current liabilities 49,464 63,566
Current Liabilities
Trade payables 62,322 35,528Other payable and accrued expenses 251,889 78,185Advance billings 5,018 31,103Amount due to contract customers ₋ 930Amount owing to susidiary companies ₋ ₋Bank borrowings - current portion 67794 73704Hire-purchase payables - current portion 805 859Tax liabilities 12945 9610
Totasl current liabilities 400,773 229,919
Total Liabilities 450,237 293,485
Total Equity and Liabilities 959,366 733,194
3.2 Income Statement
Income Statement as of 30th June 2011 for Malton Group of Companies
Currency in Millions of Malaysia Ringgit As of Jun-30 Jun-302010 2011
Revenues 346.9 462.4TOTAL REVENUES 346.9 462.4Cost of Goods Sold 257.3 300.3GROSS PROFIT 89.6 162.1Selling General & Admin Expenses. Total 12.7 13.9Other operating expenses 41.6 52.1OTHER OPERATING EXPENSES. TOTAL 54.2 66.1OPERATING INCOME 35.4 96.0Interest expenses -6.3 -9.0
NET INTEREST EXPENSE -6.3 -9.0Income(Loss ) on Equity Investments 1.6 0.5Other Non-operating Income(Expenses) 5.1 10.6EBT,EXCLUDING UNUSUAL ITEMS 35.8 98.2EBT,INCLUDING UNUSUAL ITEMS 35.8 98.2Income Tax expense 13.8 25.5
Minority Interest in Earnings ₋ ₋Earnings from Continuing Operations 22.1 72.7NET INCOME 22.1 72.7NET INCOME TO COMMONINCLUDING EXTRA ITEMS 22.1 72.7NET INCOME TO COMMONEXCLUDING EXTRA ITEMS 22.1 72.7
4. Cash flow from the two years financial statement
STATEMENTS O F CASH FLOWSfor the year ended 30 JUNE 2011
2011 2010RM'000 RM'000
CASH FLOWS FROM/(USED IN)OPERATING ACTIVITIES
Profit for the year 72,694 22,067 Adjustments for:Income tax expense recognised in the income statements 25,458 13,753 Finance costs 9,026 6,288
Depreciation of property, plant and equipment 2,435 2,176 Impairment loss on other investments ₋ 1,993 Impairment loss on investment in subsidiary companies ₋ ₋Allowance for foreseeable loss 3,754 946 Inventories written down 4,682 873 Write-offs of:Development expenditure 2,158 587 Property, plant and equipment 180 56 Allowance for doubtful debts ₋ 201 Share in results of associated companies (537) (1,575)Excess of net assets over cost of acquisition ofthe remaining interest in subsidiary company ₋ (1,463)
Interest income (2,367) (826)Gain on disposal of other investments ₋ (796)Gain on disposal of property, plant and equipment (323) (100)Unrealised gain on foreign exchange (78) ₋Gain on fair value changes of investment properties (5,290) ₋Dividend income ₋ ₋
Operating Profit/(Loss) Before Working Capital Changes 111,792 44,180
(Increase)/Decrease in:Property development costs, net of interest expense ofRM4,134,000 (2010: RM3,686,000) 54,898 73,603 Inventories 12,847 11,614 Trade receivables (25,665) 70,018 Other receivables and prepaid expenses 6,137 4,806
Accrued billings 4,479 (40,095)Amount due from contract customers (1,179) 13,974
Increase/(Decrease) in:Trade payables 27,534 (53,380)Other payables and accrued expenses ( 1,826 (175) 52,693 3,658)Advance billings (26,085) 19,443 Amount due to contract customers (930) (938)
Cash Generated From/(Used In) Operations 106,725 139,567 Income tax paid (28,056) (8,424)Income tax refunded 804 29
Net Cash Generated From/(Used In) Operating Activities 79,473 131,172
CASH FLOWS FROM/(USED IN)INVESTING ACTIVITIES(Increase)/Decrease in:Land held for property development, net of interestexpense of RM867,000 (2010: RM1,796,000) (8,474) (11,573)Amount owing by subsidiary companies ₋ ₋
Fixed deposits pledged to licensed banks 1,748 (3,499)
Investment in associated companies ₋ (8,300)
Acquisition of remaining interest in subsidiary company ₋ (5,675)Purchase of other investments (55) (3,734)Additions to property, plant and equipment (6,801) (1,117)
Proceeds from disposal of other investments - 2,811 Proceeds from disposal of property, plant and equipment 333 112 2Investment in subsidiary companies - - Interest received 1,348 826 Dividend received
Net Cash (Used In)/From Investing Activities (11,901) (30,149)
CASH FLOWS FROM/ (USED IN)FINANCING ACTIVITIESProceeds from long-term loans 34,500 12,500 Repayment of long-term loans ) (34,067) (36,893)Payment of hire-purchase payables (654) (987)Increase/(Decrease) in amount owingto subsidiary companies ₋ ₋Dividend paid (3,919) ₋Interest paid ) (9,597) (8,709) (10,202) (11,770
Net Cash Used In Financing Activities (14,342) (37,150)
NET INCREASE/(DECREASE)
IN CASH AND CASH EQUIVALENTS 53,230 63,873
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 38,857 (25,016)
CASH AND CASH EQUIVALENTS AT
END OF YEAR 92,087 38,857
5. Cash budget
Malton group of companies with its diversified business strategy in both Property Development as well as
Construction & Project Management Division is the leading property developing company in Malaysia. It
has just released its Annual Report ending 30th June 2011.
5.1 Cash budget further 3 months ending 30th Sept 2011
Cash budget further 3 months ending 30th Sept 2011
RM 000 RM 000 RM 000Details Jul Aug SeptBalance at beginning 207,155 507,155 507,155 ReceiptsSales of Property 700,000 750,000 900,000 Bank Loan − − 50,000 Shares Issued 100,000 − −
Total received 800,000 750,000 950,000
DisbursementCash Purchases of material 200,000 300,000 350,000 Interest expenses 100,000 150,000 200,000 Salary & Admin expenses 100,000 200,000 220,000 Operating expenses 100,000 100,000 100,000
Total Disbursement 500,000 750,000 870,000
Surplus / deficit 300,000 0 80,000
Balance at end 507,155 507,155 587,155
6. Capital Investment Decision
Malton Group of companies primarily involved in Property Development as well as Construction & Project
Management Division is venturing into a huge construction project due to start in Jan next year. This will
allow the company to further strengthen its share in the local property development market.
Malton group of companies conducted a detailed market research to investigate the potential differences of
the two projects. In order to achieve its market share Malton Group of companies as ventured into two luxury
property development projects.
6.1 Project A: Damansara 3 storey exclusive bungalows named D’sara Residences.
a) D’sara Residences is an exclusive residential bungalow which sits on 30 acres of prime land in the
prime area of Damansara.
b) This freehold project is scheduled to be launched in January 2013 and is expected to be completed
in 4 years time in December of 2016.
c) The D’sara Residences features a mix of luxury bungalows with built-up area of 3600 square feet
and 4200 square feet. There will be a total of 600 units of 3600 square feet bungalows and 400
units
4200 square feet of bungalows.
d) The asking price for the 3600 square feet bungalow is RM2, 300,000.00 while the 4200 square
feet of bungalow is going for RM3, 300,000.00.
e) The details of expected cash flow for the D’sara Residences for per year are given below:
i.) Initial capital which was needed in 2013 to start this huge under taking is
RM60,000,000.00 for the land, RM 17,000,000.00 to develop the land in order for the
construction work to begin, RM7,500,000.00 for labour cost, RM 73,000,000.00 for
materials and RM1,500,000.00 for other expenses which includes advertisement in all
medias.
ii.) The estimated labour cost, material cost and other expenses for the years 2014, 2015 and
2016 will be RM9, 000,000.00, RM 4,200,000.00 and RM2, 300,000.00 respectively.
f) The total units of exclusive bungalows which was expected to sell according to the respective
years is shown in the table below.
YEAR 3600 square feet bungalows 4200 square feet bungalows
2013 320 190
2014 120 130
2015 90 100
2016 70 80
6.2 Project B: 3 storey exclusive LOHAS (live style of health and sustainability) bungalows with individual
swimming pool named Bukit Pristine Cyberjaya Bungalows.
a) Bukit Pristine Cyberjaya Bungalows is gated and guarded LOHAS (live style of health and
sustainability) community style living which will be located atop a hill overlooking Klang
Valley in the pristine Bukit Puchong area. Bukit Pristine Puchong Bungalows with be built on
35 acres of land by far will be the most prestigious residences in Cyberjaya.
b) This highly prestigious freehold project is expected to be launched in 2013 and is scheduled
to be completed in the year 2017 spanning a total of 5 years of under taking.
c) Bukit Pristine Cyberjaya Bungalows has a built up ranging from 11,000square feet and
16,000 square feet bungalows tailored to meet the LOHAS (live style of health and
sustainability) requirement and has designs to meet the individual preferences and life style.
In total there are four distinctive architectural designs that will live up to any individual
looking for unique look and feel. These bungalows are named Aquarius, Taurus, Scorpio and
Leo. There will be a total of 80 units of 11,000 square feet bungalows and 50 units’ 16,000
square feet bungalows.
d) The asking price for the11,000 square feet bungalows stands at RM5,300,000.00 and
RM7,500,000.00for the 16,000 square feet bungalows
e) The details of expected cash flow for the Bukit Pristine Cyberjaya Bungalows per year of this
project are given below.
i.) Initial capital needed in 2013 to kick start this project is RM110,000,000.00 for land
acquisition, RM35,000,000.00 to develop the land in order for construction to start,
RM11,000,000.00 for labour cost, RM85,000,000.00 for materials and RM3,500,000.00 for
other expenses which includes advertisement in all medias.
ii.) The estimated labour cost, material cost and other expenses for the years 2014, 2015, 2016
and 2017 will be RM35, 000,000.00, RM18,000,000.00, RM6,000,000.00 and
RM1,500,000.00 respectively.
iii.) The total unit of exclusive bungalows which was expected to sell according to the
respective years is shown in the table below.
YEAR 11,000 square feet bungalow 16,000 square feet bungalow
2013 40 20
2014 20 10
2015 8 8
2016 7 7
2017 5 5
All the costs and revenue from these projects are expected will take place at the end of each year.
The cost of capital is 12%.
6.3 NPV calculation for Project A: D’sara Residences.
NPV for Project A: D’sara Residences.
1 2 3 4Year 2013 2014 2015 2016
(RM) (RM) (RM) (RM)DetailsCash inflowa) 3,600 sq ft (@ RM 2,300,000.00) 736,000,000.00 276,000,000.00 207,000,000.00 161,000,000.00
b) 12,000 sq ft (@ RM 3,300,000.00) 627,000,000.00 429,000,000.00 330,000,000.00 264,000,000.00TOTAL A 1,363,000,000.00 705,000,000.00 537,000,000.00 425,000,000.00
Cash outflowa) Land purchase 60,000,000.00b) Land development 17,000,000.00c) Labour cost 7,500,000.00 9,000,000.00 9,000,000.00 9,000,000.00d) Material 73,000,000.00 4,200,000.00 4,200,000.00 4,200,000.00e) Others 1,500,000.00 2,300,000.00 2,300,000.00 2,300,000.00TOTAL B 159,000,000.00 15,500,000.00 15,500,000.00 15,500,000.00
Nett Cash flow ( A - B ) 1,204,000,000.00 689,500,000.00 521,500,000.00 409,500,000.00
Discount after 12% 1 0.893 0.797 0.712Present value 1,204,000,000.00 615,723,500.00 415,635,500.00 291,564,000.00
Nett presen value for Project A (RM) 2,526,923,000.00
6.4 NPV calculation for Project B: Bukit Pristine Cyberjaya Bungalows.
NPV for Project B: Puchong Gardens - Haven of Luxury
1 2 3 4 5Year 2013 2014 2015 2016 2017
(RM) (RM) (RM) (RM) (RM)Cash inflow
a)11000 sq ft (@ RM 5.3 Mil)212,000,000.0
0106,000,000.0
0 42,400,000.0037,100,000.0
026,500,000.0
0
b) 16,000 sq ft (@ RM 7.5 Mil)150,000,000.0
0 75,000,000.00 60,000,000.0052,500,000.0
037,500,000.0
0
TOTAL A362,000,000.0
0181,000,000.0
0102,400,000.0
089,600,000.0
064,000,000.0
0
Cash outflowa) Land purchase 110,000,000.0
0
b) Land development 35,000,000.00 35,000,000.00 35,000,000.0035,000,000.0
035,000,000.0
0
c) Labour cost 11,000,000.00 18,000,000.00 18,000,000.0018,000,000.0
018,000,000.0
0d) Material 8,500,000.00 6,000,000.00 6,000,000.00 6,000,000.00 6,000,000.00e) Others 3,500,000.00 1,500,000.00 1,500,000.00 1,500,000.00 1,500,000.00
TOTAL B168,000,000.0
0 60,500,000.00 60,500,000.0060,500,000.0
060,500,000.0
0
Nett Cash flow ( A - B )194,000,000.0
0120,500,000.0
0 41,900,000.0029,100,000.0
0 3,500,000.00
Discount after 12% 1.0000 0.8930 0.7970 0.7120 0.6360
Present value194,000,000.0
0107,606,500.0
0 33,394,300.0020,719,200.0
0 2,226,000.00
Nett present value for Project A (RM)
357,946,000.00
6.5 Net present Value Summary
Based on the Net present Value of Project A, D’sara Residences and B, Bukit Pristine Cyberjaya Bungalows
we can clearly deduce that project A is a better project to invest. Within a short period of 4 years Project A
has Net Present Value of RM 2,526,923,000.00 as oppose to project B which stands at RM 357,946,000.00.
7. Capital Structure (Cost of Capital)
Malton Group of companies is investigating on which form financing it requires based on the data provided
below.
a) The floatation cost of using bond is 15% par value. The current price of the Bond is 10%
coupon; 10 years bond issued is RM1100. The firm’s tax bracket is 30%.
b) The preferred share is RM220 with ongoing dividend of 10% based on the market price. The
floatation cost is 5% of the par value.
c) Its common stock is currently selling at RM80 per share. The last dividend paid was RM3.00
and the dividend is expected to grow at constant rate of 5% and floatation cost is RM5.
d)
a) Cost of Bond Before Tax
I +P-(mp-fc)
nkd = P+ (mp-fc)
2
(100 x 10%) + 1000 - (1100-150) 10
kd = 1000 + (1100-150)2
kd = 100 + 5 975
kd = 0.1076 or 10.76%
After tax
kd* = kd( 1 - TC )
kd* = 0.1076(1- 0.3)
kd* = 0.1076(0.7)
kd* = 0.0754 or
kd* = 7.54%
b) Cost of proffered shares
kps= Dpmp-fc
kps= RM220 x
10%220 - (5% x 100 )
kps= RM22 220 - 5
kps= RM22 21 5
kps= 0.1023 or
kps= 10.23%
c) Cost of common shares
D1 = Do(1+g)
D1 = 3.00(1+0.05)
D1 = 3.15
Kcs = (D1) ₊ g(mp-fc)
Kcs = 3.15 ₊ 0.0580-5
Kcs = 0.092 or
Kcs = 9.20%
Based on the calculations on the above comparing the Cost of Bond, Cost of Preferred shares and Cost of
Common Shares we can see that the preferred Cost of Bond is the logical choice as it is the lowest standing
at 7.54%. This has low cost of capital as such the return profit will be higher.
The cost of Bond will be used as financial resources to get the RM159, 000,000.00 to finance the D’sara
Residences project.
8. Cost-volume-Profit Analysis
The Malton Group of Company’s two types of project of the D’sara Residences of the 3,200 square feet and
4,200 square feet present revenue, cost and sales data for two products follows:
D’sara Residences.
3,200 sq feet 4,200 sq feetSelling Price 2,300,000.00 3,300,000.00Variable expenses 2,000,000.00 2,000,000.00Fixed cost 40,000,000.00 60,000,000.00
a) Breakeven point for 3200 square feet
Breakeven point (3200 sq feet) = fcSp - Vc per unit
Breakeven point (3200 sq feet) = 40,000,000.00 2,300,000.00 -2,000,000.00
Breakeven point (3200 sq feet) = 133 units
b) Breakeven point for 4200 square feet
Breakeven point (4200 sq feet) = fcSp - Vc per unit
Breakeven point (4200 sq feet) = 60,000,000.00 3,300,000.00 -2,000,000.00
Breakeven point (4200 sq feet) = 46 units