BJland

A day after BJland redeemed some rm700 million worth of bonds – representing a chunk of its debt – on Aug 15, 2011, the company announced the acquisition of 57.3 acres of land from the Penang Turf Club for rm460 million cash. The tract is for a planned property project worth rm1.52 billion in GDV.

This is BJLand’s first major land acquisition over the past few years and given the huge cash outlay. However, the purchase may not be a signal that BJland, now with a lighter debt burden, is ready to ramp up its property developments. Sources say BJLand is unlikely to aggressively undertake major launches.

BJland has several projects in Vietnam and South Korea … its 600ha in Vietnam . Still the value of the bulk of these projects is only on paper, with the group taking its time to develop them.

In Malaysia , some of BJLand’s bigger planned projects include the rm1.6 billion Ritz Carlton in Jln Ampang and the redevelopment of the Selangor Turf Club land in Sungai Besi.

The controversial STC project, the GDV of which was stated as rm6 billion, is still pending approvals as it involves relocating the race course elsewhere in Selangor. As of Ritz Carlton project, which has not progressed much since it was announced in early 2009, the source says BJLand is looking to presell a portion on the offices to investors and hold back the launch the residential units.

To recap, the full redemption by BJLand of rm696 million of outstanding 8% bonds on Aug 15, 2011 has taken a load off the group’s balance sheet. The bonds were stated in BJLand’s balance sheet as at April 30, 2011 with an outstanding value of rm711 million along with short term borrowings of rm584 million and long term borrowings of rm700 million.

With the bonds gone, what remains on BJLand’s balance sheet now are total short and long term borrowings of rm1.26 billion, Medium term notes of rm550 million were also stated in BJland’s balance sheet but these were held by its subsidiary BJToto.

With reduced borrowings, things should be much easier for BJLand, which received rm189 million in dividends from BJToto in FY2010 ended April 30. BJLand owned 42.33% stake of BJToto as at July 2011 after transferring some BJtoto shares to certain bondholders as settlement.

With strong annual dividends from BJtoto and its own operating cash flow from hotel operations and property development, the group can handle its reduced gearing of rm1.26 billion.

It is not clear by how much BJLand is prepared to gear up its balance sheet for the acquisition of the Penang Turf Club land, although the duration of the project is said to be only five years. BJLand had said that the acquisition will be funded through internally generated funds and/or borrowings.

The payment for the Penang Turf Club land will be made on a staggered basis over three years. There will be an initial deposits of rm46 million followed by the first payment of rm138 million some 12 months from the conditional date of the SPA.

The acquisition of Penang Turf Club land is still subject to BJLand obtaining planning permission for the development from the relevant authorities and the approval of the members of the turf club.