Malaysia Oversea Ventures - GLC, Lion Group, UMW, IJM

The world is their oyster

By ELAINE ANG, LEONG HUNG YEE and LOONG TSE MIN, The Star

Malaysian companies venturing overseas in search of greener pastures have been on the rise in the past two to three years. StarBiz takes a look at some of the successful and not-so-successful overseas ventures and the lessons learnt

TALK to the top management of any local company and venturing overseas is likely to be on their “to do” list as part of the strategic plan to grow the business.

With globalisation, Malaysian companies, big and small, are looking at the world as their oyster – venturing overseas to expand their target sales markets, increase production capacity, lower production costs and diversify geographical business risks.

The value of overseas mergers and acquisitions (M&As) involving Malaysian companies grew more than 40% per annum between 2004 and 2006 to RM21.8bil last year.

From Left: Tan Sri William Cheng, chairman and ceo Lion Group, Datuk Abdul Halim Harun, group md and ceo UMW Holdings and Datuk Krishnan Tan ceo and md IJM Corp.

Net direct investment abroad by Malaysians is also on the rise, with a 72% increase in 2006 to RM22bil. The momentum going into 2007 is encouraging with close to RM5bil in the first quarter alone.

“We have been advising a growing number of Malaysian companies who are contemplating venturing overseas. The number has clearly been on the up-trend in the last three years,” said PricewaterhouseCoopers Advisory Services Sdn Bhd (PWC) senior executive director Tan Siow Ming.

“The concentration of deals is in India, China and South-East Asia. The number of cross-border deals that we have worked on has more than tripled from 2004 to 2006.”

Tan noted two separate waves of players venturing overseas.

“In the big league, the large listed or private and Government-linked companies (GLCs) are into sectors that require larger investments such as telecommunications, energy, utilities, infrastructure, financial services and real estate development.

“The second wave comprises Malaysian companies that are looking at smaller investments in manufacturing, oil and gas support services, retailing and services,” he said.

According to him, the drive to go abroad for large conglomerates and GLCs is due to the limited growth potential in the country's mature domestic markets.

The smaller Malaysian players, however, seek a regional footprint to leverage on lower labour costs or to access new markets for growth.

However, as in all businesses, Malaysian companies venturing overseas have experienced some runaway success stories and some failures.

A success story of overseas expansion is Lion Diversified Holdings Bhd's retail business under Parkson Departmental Store in China.

The company now hopes to replicate its successful Chinese business model in Vietnam.

A company spokesperson said Lion Diversified's expansion plans for the Parkson retail business in Vietnam had been progressing positively over the last two to three years.

In mid-2005, Parkson opened its first store in Ho Chi Minh City, Vietnam followed by a second store in Hai Phong City in January this year. The third store opened in June in Ho Chi Minh City.

“We invested about US$4mil to US$5mil for each store in Vietnam and are currently the only foreign-owned department store in Vietnam.

“Although the Vietnam operations have not begun to contribute substantially to group revenue at the moment, we foresee a growth in its contribution in the near future,” the spokesperson said.

Fortress Capital Asset Management (M) Sdn Bhd chief executive officer Thomas Yong said the country's saturated telecommunication sector had pushed Telekom Malaysia Bhd and Maxis Communications Bhd to venture into new markets in Asia.

Maxis acquired a 51% stake in a greenfield celco (start-up mobile phone operator) PT Natrindo Telepon Selular in Indonesia in January 2005 for US$100mil.

“Operating in Indonesia, however, has been difficult as regulatory issues delayed services roll-out and as a result, Natrindo is still making losses,” Yong said.

However, he pointed out that not all foreign ventures were fruitless.

In January 2006, Maxis acquired a 74% stake in Indian celco Aircel Ltd for US$800mil. Aircel has contributed positively to Maxis's bottom line since the day it was acquired.

Yong highlighted the local gaming sector, which expanded overseas due to growth-restricting domestic regulations.

He noted that the Genting group had acquired several British casinos amounting to RM5bil in investments, spent another RM6bil in Star Cruises and will spend a whopping RM11bil (when completed) on the Sentosa Integrated Resort in Singapore.

“While the business rationale appears logical, the overseas ventures have yet to match its hugely successful domestic track record,” he said.

Construction companies are another group that have moved offshore in a big way, as Malaysian construction activities slowed down in the last couple of years. The main shift has been to India and West Asia.

Almost all the larger construction companies (WCT Engineering Bhd, Gamuda Bhd, IJM Corp Bhd and Zelan Bhd) have taken up overseas projects.

Yong said banks had also expanded overseas but via investments into existing banking entities instead of setting up new operational start-ups.

The CIMB group acquired a 51% stake in PT Bank Niaga, Indonesia, in 2002 for RM435mil.

Public Bank Bhd similarly acquired a 100% stake in Asia Commercial Bank (ACB), Hong Kong, in 2006 for HK$4.5bil. ACB has been able to deliver tremendous loans growth of 24% in the first half of the year compared with Public Bank's domestic loan growth of 7.7%.

This investment has been an immensely successful means for Public Bank to tap the fast-growing China market via Hong Kong.

iCapital.biz Bhd chief executive officer Tan Teng Boo is calling for more Malaysian companies to spread their wings overseas.

“The pace is still slow. There are many exciting opportunities outside Malaysia although the challenges could be huge. Smaller companies should also try to explore the overseas market to grow their business,” he said.

Malaysia Property Updates - Klang Valley, PJ, Kuala Lumpur Price escalating

New growth corridors added

Strong demand fuelling price escalation within Klang Valley

By ANGIE NG, The Star

THE Klang Valley, also known as the Kuala Lumpur conurbation and the country's fastest growth region, is seeing new growth corridors being added.

The implementation of new infrastructure projects, especially highways, has opened up many new development opportunities and new growth areas.

According to Ho Chin Soon Research Sdn Bhd managing director Ho Chin Soon, good location with supporting infrastructure facilities and amenities is one of the prime factors driving the success of a property project. The right timing and strong branding are also important considerations.

“Although many parts of the Klang Valley are busy with building activities with new corridors sprouting, Petaling Jaya will continue to be the centre of gravity for years to come. That's why although the areas of growth are expanding outwards, many developments and changes are still taking place within 15km to 25km radius of Petaling Jaya (see map).

“But the most active area is undoubtedly the Kuala Lumpur City Centre (KLCC) with one of the highest concentration of high-end condominiums and bustling retail and commerce activities,” Ho said.

Other robust areas for development include Mont'Kiara and suburban enclaves such as Kelana Jaya, Kota Damansara and parts of Ampang and Wangsa Maju.

Ho said property buying and investment activities had picked up in the current positive market environment.

The exemption of real property gains tax and liberalised rulings for foreign purchasers has helped.

“Strong demand for well-designed and located properties is fuelling price escalation in the primary and secondary property markets. Real estate prices, especially in the high-end residential market, are recording strong gains in capital values,” Ho said.

He said the value of development lands in the prime areas of Kuala Lumpur had reached a high of RM1,000 to RM1,300 per sq ft (psf) from RM400 to RM600 psf just two years ago.

For suburban locations, recent project launches have recorded price escalations of between 8% and 12% compared with last year’s launch for similar units.

Bandar Utama's 2½-storey link houses have been snapped up at RM800,000 at their launch recently compared with RM680,000 less than two years ago, which shows that demand for well-located houses continues to be robust.

“My opinion is that buyers must quickly buy now before prices shoot up further. Based on what happened during the last cycle, property prices went up 50% to 70% in just three years.

“With that kind of escalation, it may be possible to see double-storey terrace houses in Bangsar and other well sought-after addresses touching RM1mil.”

Ho said going by the trend of previous market cycles, “there is still room for prices to climb further and this will be exacerbated by the rising inflation (see chart).”

The rise in salaries of civil servants in the middle of this year could fuel further inflation in the prices of goods and services, he said, adding that investment in property was now widely adopted as a hedge against inflation.

“Property has proven to be one of the best tools for capital appreciation.

“If you had invested RM1mil in residential real estate in KL in 1990, you would have more than doubled your asset value as it would have appreciated to RM2.5mil by the end of 2006,” Ho said.

America's fastest-growing suburbs cities

Of the 100 suburbs most speedily spreading, California has the fastest, Arizona has the biggest and Texas has the most. ( By Matt Woolsey, Forbes.com )


Los Angeles is sometimes called the "Sultan of Sprawl." But you wouldn't know it by looking at the country's fastest-growing suburbs. Not a single one falls in the L.A. metropolitan area.

Instead, Angelenos are packing their bags and heading 60 miles east to San Bernardino, where 12 of the country's 100 fastest-growing suburbs are located. Leading the pack? Beaumont, which has grown 130% since 2000.

It's easy to understand why. Home prices in the Riverside-San Bernardino metropolitan area are 30% less expensive than in L.A., and household incomes are comparable.

The move from basin to valley makes enough sense that San Bernardino's rate of net domestic migration has near quadrupled since 1990, while the Los Angeles metro area posted negative net migration figures over that same period. Last year, it lost 72,000 more residents than it gained.

Our list was compiled using U.S. census growth data from 2000 to 2006 and provided by Demographia, a St. Louis research firm. Demographia excluded outlying towns that were in suburban counties but didn't have significant economic and social ties to the big city. Suburbs included cities, townships and villages that had more than 10,000 people in 2000.

Behind the numbers

The fastest-growing suburb in the nation is Lincoln, Calif., just outside Sacramento. Its population jumped from 11,746 to 39,566, an increase of 236%. The Sacramento area isn't cheap by national standards, but it's growing because it's a less-expensive alternative to Los Angeles, San Francisco or San Diego.

The fastest-growing big suburb (with a population of 100,000 or more) is Gilbert, Ariz., outside Phoenix, which grew from 112,766 people to 191,517. The Phoenix area saw the greatest positive domestic migration of any American metro area last year, with 115,000 more people moving into town than leaving. Affordable housing and a growing economy are draws for the city.

Texas has the lion's share of the country's 100 top-growth suburbs, with 20. (Twelve of these are in the Dallas-Fort Worth metro area.) That's partly because geographic growth is almost completely unregulated in the Lone Star state. Sprawl has its pros and cons. These areas have some of the most affordable homes in the nation, because there is plenty of supply to meet demand. But transportation expenses are often high. In Houston, transportation costs are the No. 1 household expense, according to the Brookings Institution.

Cities that engage in restrictive growth policies find themselves with different trade-offs. In Boston's inner suburbs, including Chelsea and Cambridge, zoning and growth restrictions designed to prevent sprawl instead force people to look farther outside the city for affordable housing. According to the same Brookings Institution study, metro areas with growth-exclusion plans have the most expensive housing in the country, because there is a limited supply of homes close to the city.

Last year, about 16,000 more people left the Boston metro area than moved in, and the suburbs continued to expand geographically. The result is a thinning of the area. If sprawl is defined as the density of population over a geographic space, that makes Boston more of a sprawl than places such as Phoenix and Las Vegas, which are spreading out faster but with a more concentrated population.

Rounding out the top 10 fastest-growing suburbs after Lincoln were four Phoenix suburbs: Buckeye, Surprise, Goodyear and Avondale; Plainfield, outside of Chicago; Beaumont, outside of San Bernardino, Calif.; Frisco and Wylie outside of Dallas; and Woodstock, outside of Atlanta.