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Analyst: YNH’s disposal of medical facility timely

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by December 28, 2016 General

PETALING JAYA: Property developer YNH Property Bhd’s move to dispose of a medical facility in Perak for RM63mil could be seen as a move by the company to pare down debt and improve future earnings, in light of the challenging market conditions.

A property analyst said the Manjung, Perak-based company’s decision to dispose of the facility was timely, given the less-than stellar property market outlook.

“With the weaker property market now, sales have been slow, especially for existing projects and money coming in could help to either free up cashflow or reduce borrowings,” he said.

As at Sept 30, 2016, YNH’s borrowings stood at RM610.59mil. Liabilities were at RM1.08bil.

Earlier this month, YNH told Bursa Malaysia that wholly-owned subsidiary, YNH Hospitality Sdn Bhd, had agreed to enter into discussions with Pantai Medical Centre Sdn Bhd (PMC) to dispose of Pantai Hospital Manjung (PHM).

The five-storey facility, built on nearly 2ha, is in Manjung, Perak.

“This is in response to a letter dated Nov 25, 2016 received from PMC expressing its interest to acquire the property, subject to all terms and conditions being mutually agreed by the parties,” said YNH, without revealing details on the rationale for the disposal.

According to reports, the RM50mil PHM project was completed in 12 months by YNH. Based on its website, PHM is a multi-disciplinary community hospital located within the commercial area of Manjung.

The 58-bed hospital houses 18 medical specialists and provides an extensive range of disciplines including anaesthesiology, general medicine, ophthalmology, general surgery, ear, nose and throat surgery, orthopaedics, as well as obstetrics and gynaecology.

PHM, one of 14 hospitals operated by Pantai Holdings Bhd, is part of Parkway Pantai Ltd, a subsidiary of IHH Healthcare Bhd.

Parkway Pantai, one of Asia’s largest integrated private healthcare groups has 31 hospitals throughout the region, including Singapore, Malaysia, India, China, Brunei and the United Arab Emirates.

For the third quarter ended Sept 30, 2016, YNH’s net profit surged more than 500% to RM10.04mil from RM1.50mil in the previous corresponding period, mainly due to sales of inventories during the period.

Revenue, however, slipped to RM90.04mil from RM112.82mil in the previous corresponding period.

For the nine-month period ended Sept 30, the company’s net profit jumped to RM25.75mil from RM9.12mil a year earlier, while revenue was at RM246.70mil from RM259.91mil previously.

Going into 2017, the company will be looking to develop Menara YNH located along Jalan Sultan Ismail in Kuala Lumpur.

“Menara YNH has a gross development value (GDV) of RM2.1bil. Approved development order had already been obtained for it, comprising an office tower and shopping mall,” YNH said in its third quarter 2016 financial results notes.

In February last year, the company signed a memorandum of understanding (MoU) with Hilton Worldwide Manage Ltd, whereby the latter would manage a proposed five-star hotel at its Menara YNH development.

The proposed project, which will comprise a hotel, offices and retail outlets, was initially supposed to be a 45-storey, iconic office tower development, known as Menara YNH.

The proposed new plan would still see YNH retaining 50% of Menara YNH as investment property, as well as its future headquarters.

Observers had remained sceptical if the development would take off, as the company had in the past let down investors with delays and changes to its plan and partners for the Menara YNH development, which has been talked about since 2006.

YNH had originally tied up with Singapore property giant CapitaLand Ltd for the project in 2006.

The two companies had signed an MoU to jointly develop the tower on a 60:40 basis.

The plan was for the construction to take off in mid-2007 and completed by end-2011.

The MoU was, however, terminated in June 2007.

It had been reported that the company said it would be beneficial to have a mixed development and to on-sell it to the market eliminating the risk of being dependent on a single buyer.

Subsequently, the company entered into an agreement with Kuwait Finance House (M) Bhd in Jan 2008, in which the latter would buy a 50% stake in the project for RM920mil or around RM1,230 per sq ft.

YNH also received offers for the remaining half of the office tower at an even higher price even though it had initially wanted to retain the other portion. But KFH, beset by internal troubles and the 2008/2009 global financial crisis, backed out of the deal in mid-December 2009.

Separately, YNH said it remained cautiously optimistic of the Kiara 163 mixed development project.

The proposed commercial development comprises two blocks of 43-storey building with hotels suites, one small office versatile office tower and one shopping mall.

The project has a GDV of RM1bil, with the main building works already being commenced.

YNH also said it had entered into a series of joint venture projects for the development of a few pieces of land strategically located near Mont’ Kiara, Hartamas, Kuala Lumpur city centre, Ipoh city and Seri Manjung town.

“These developments are at the planning stage and have an estimated GDV of RM1.8bil and are expected to contribute to the group’s earnings for the next 15 to 20 years,” it pointed out.

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