On behalf of the Board of Directors of TA Enterprise Berhad, I am
pleased to present the 24th Annual Report and Financial Statements of the Company and the Group for the financial year
ended 31 January 2014.
The performance of the TA Group strengthened following an encouraging set of financial results in financial year ended ("FYE") 2014. The Group recorded a pre-tax profit of RM191.3 million in FYE 2014, representing a growth of 46.7% as compared to RM130.4 million in FYE 2013. Net profit attributable to shareholders stood at RM137.0 million, a surge of 66.4% from RM82.3 million in FYE 2013. This translated to an improved earnings per share of 8.0 sen in FYE 2014. The return on shareholders' equity also rose from 4.9% in FYE 2013 to 7.6% in FYE 2014.
The improvement was underpinned by 11.5% higher revenue of RM870.7 million, with increased contributions in other income and sharp decrease of 33.6% in other expenses. The Group also enjoyed a significantly lower effective tax rate in FYE 2014. Muting the Group's stellar performance was a 23.0% increase in finance costs and share of losses on joint ventures totaling RM5.1 million.
The Group's domestic and international business operations comprise four core areas, namely Broking & Financial Services, Property Development & Investment, Fund Management and Hospitality Industry. The Group's international operations are well diversified in countries like Australia, Singapore, Canada, China and Thailand.
The Broking and Financial Services Division registered a 10.0% year-on-year decline to RM115.9 million in revenue. This segment accounted for approximately 13.3% of the Group's total revenue in FYE 2014. Despite the higher average market capitalization of RM1.6 trillion between Feb 2013 and Jan 2014, compared to RM1.4 trillion in the previous corresponding period and the benchmark FBM KLCI hitting a record high of 1,882.2 on the last trading day of 2013, performance was
capped by competitive pressures and market uncertainties.
The Credit and Lending Division reported an encouraging RM85.2 million jump in the net segment results to RM101.2 million compared to RM16.0 million in the preceding year. The steep improvement in financial performance for the division was attributed to a major loan recovery, gain on sale of investment securities, investment interest income, and foreign exchange translation gain on CAD and AUD denominated inter-co balances.
On the real estate front, the Hotel unit registered a decrease of RM10.1 million in net segment results from RM89.4 million in FYE 2013 to RM 79.3 million in FYE 2014. This was attributed to foreign exchange translation loss arising from the depreciation of USD against the Thai baht and goodwill impairment loss. Although the net segment results of the Property Development Division grew by 10% to RM29.2 million, construction of development projects at Damansara Avenue met with
higher finance costs. As a result of lower rental income, contribution from property investment contracted by 6% year-on-year.
For the FYE 2014, a final single-tier dividend of 2.8%, amounting to RM47.9 million and representing 2.8 sen per ordinary
share will be proposed for shareholders' approval.
OPERATIONS REVIEW AND DEVELOPMENT
TA Securities Holdings Berhad ("TASH") Group recorded a lower pre-tax profit of RM17.3 million in FYE 2014 compared to
RM18.1 million in FYE 2013. While brokerage income was higher, it was offset by lower revenue from service and administrative fees and higher personnel costs.
The Stock Broking Division continued to operate in a competitive environment and market sentiment is likely to be affected
by the gradual rollback of the Quantitative Easing (QE) program in the US, slower growth in China and aggressive foreign fund selling. However, progress shown in developed economies is expected to boost recovery for our exports in 2014.
We will promote our fee based activities and come up with innovative products to boost our revenue and continue to grow our branch network at strategic locations like our new branch at Segamat, Johor that started in October 2013.
TA Securities (HK) Limited recorded a lower operational loss of HKD2.1 million for the FYE 2014 as compared to HKD2.7 million for the previous financial year. The operational loss was mainly attributable to the decline in brokerage generated from Hong Kong and overseas stocks as well as lower interest income.
Hong Kong's Hang Seng Index recorded a slight gain of 2.9% in 2013 despite double digit rallies in the US and European markets. Market outlook remains subdued over rising interest rates in tandem with the tapering of US Quantitative Easing, inflationary pressures, prolonged global recession, uncertainties over China's economic growth and massive outflow of hot
UNIT TRUST AND ASSET MANAGEMENT
At FYE 2014, the total asset under management ("AUM") of TA Investment Management Berhad (TAIM) was RM790 million, being a combination of unit trust funds and direct mandate portfolios under management. The FBMKLCI was one of the best performers in Asia with a gain of 10.5% for 2013. It remained resilient even after a bout of aggressive foreign fund selling when Fitch rating Agency downgraded the country's sovereign rating outlook from stable to negative in July 2013. High redemptions were seen from the Asian region and bond funds due to fears of the negative impact from the tapering of US Quantitative Easing. Overall, the strong performance of developed markets led to high redemptions from our Asian region funds and Bond Fund due to the fear of US tapering effect, which resulted in lower management fee earned. This along with system maintenance cost and scheduled tax payment caused losses of about RM1 million for the year.
TAIM launched the TA Asia Pacific REITs Income ("TAREITs"), a real estate equity fund which offers the opportunity of owning high quality real estate portfolios in prime areas that are professionally managed with low capital investment. "TAREITs" aims to maximize total investment returns consisting of regular income and capital appreciation over the medium to long term by investing in Asia Pacific real estate investment trusts (REITs) and a portfolio of high dividend yield equity securities. Investors will also benefit from capital appreciation of properties through organic growth, accretive acquisitions and asset enhancements in Asia Pacific, which is the world's fastest growing region. For the year 2014, we target to launch four new funds with the objective of generating income for the investor. Two funds are in the final stage of approval from the Securities Commission. We are also re-branding and re-launching our existing funds to cater to current market demand.
TA Futures continued to win the Bursa Malaysia Berhad's Top Commodity Futures Broker Award for the tenth year in 2013.
Its total trading volume increased by 11.19% to 2.5 million contracts as compared to the previous year. However, operating
revenue fell 9.65% to RM9.2 million in FYE 2014, due to lower brokerage fees to combat increased competition. Profit before
tax declined by 57.2% to RM1.6 million.
As a result of the capital reduction and repayment exercise by Bursa Malaysia Derivatives Berhad which was completed in
April 2014, an amount of RM1 million was written down from TA Futures' investments. In October 2013, Bursa Malaysia Derivatives Berhad launched the Gold Futures contract adding to the list of products traded on the exchange. Moving forward, the market is expected to grow at a faster pace in 2014 with more product launches being planned and efforts made to engage the younger section of the population.
CREDIT AND LENDING
TA CAPITAL SDN BHD
TA Capital Sdn Bhd turned in a commendable performance with a pre-tax profit of RM7.8 million which is more than double
the previous year. The achievement was driven by higher operating income.
TA Capital Sdn Bhd complements the stock broking business by providing corporate lending and financing for private placement, rights issue exercise and share investments for our clients. Our main business focus is to provide support services to clients, remisiers and our other TA 's subsidiaries through ESOS and IPO financing, short and medium term loans to business enterprises and individuals for working capital and share investment purposes.
With many big cap companies coming on stream for listing on Bursa Malaysia in the second half of this year, we are optimistic of our earnings growth prospects for financial year 2015.
OUTLOOK Sound economic growth on the back of exports recovery, wealth effect from the equity market rally, stable job market, cheap financing and unwavering demand kept the property market lively in 2013 until tougher policy measures were announced in the 2014 Budget. The increase in Real Property Gains Tax (RPGT), removal of Developer Interest Bearing Scheme (DIBS) and higher floor price for foreign buyers succeeded in curbing speculative buying and upward price pressure. The impact was less profound on property launches in good locations and landed properties. While we admit 2014 will be a challenging year, we believe our integrated developments in strategic locations would continue to attract interest from genuine buyers.
Damansara Avenue – Bandar Sri Damansara
Our landmark development in Petaling Jaya, Damansara Avenue with a gross development value (GDV) of RM3.8 billion saw
the completion of Ativo Plaza consisting of 198 signature office suites and 43 retail units in August 2013. Our Group retained the 43 retail units on the ground and mezzanine floors for rental to provide a stable recurring income. The Azelia residences comprising of 250 units of condominiums which have been 92% sold, is scheduled for handover in the 2nd quarter of 2014.
Riding on the success of our Ativo Plaza, we are currently planning to develop Ativo Annexe, which is situated between Ativo
Plaza and Azelia Residences. The Annexe will be seamlessly connected to Ativo Plaza and we plan to integrate both retail and
The next project in the pipeline for Damansara Avenue is Ativo Sofo with a GDV of RM370 million, consisting of two towers
located on a 2.83 acres site adjacent to Ativo Plaza. A development approval for 972 units of Small Offices Flexible Offices
was obtained in March 2013 and sales will be launched in the 4th quarter of 2014.
TA 3 & 4 – Mixed Commercial Development opposite KLCC
Building plans for twin 50-storey buildings on a 2.47 acre piece of land opposite Kuala Lumpur City Centre Twin Towers have been approved in February 2014. Earthworks are expected to commence in the 3rd quarter of 2014 after obtaining the
relevant building construction approvals. The project is expected to register an approximate GDV of RM1.4 billion upon completion. We are currently in negotiation with a reputable international hotel chain to brand and operate the luxurious hotel and serviced residences. We are confident that the reputable hotel brand and prime location within the Golden Triangle will place the two landmark towers on the map of Kuala Lumpur City.
Taman Pertama, Cheras, Kuala Lumpur – Condominiums
We are currently planning to develop 2 blocks of condominiums, housing 275 units of residences with integrated facilities, which have a GDV of RM159 million.
The Peninsular - Mixed Development in Puchong
TA Global via its subsidiary, TA Properties Sdn Bhd entered into a joint venture project to develop 92 acres of leasehold land in Sepang, Selangor with a GDV of RM596 million. Sales of 98 units of 2.5 and 3-storey super link terrace houses will be launched in 1st quarter of 2015.
Nusa Lagenda – Bandar Saujana Putra
Nusa Lagenda, a 50 % joint venture between TA Properties Sdn Bhd and Prominent Xtreme Sdn Bhd, to develop 255 units of apartments with GDV of RM99.5 million at Bandar Saujana Putra, Selangor and is still in the planning stage.
The Gardens- Richmond, Province of British Columbia The Gardens is a comprehensive master planned urban village in the heart of Richmond, British Columbia. The GDV is CAD85.0 million and construction of the two apartment blocks named Azalea and Magnolia containing 90 and 92 units respectively is currently in full progress with expected completion in June, 2014. The 2nd phase of 163 units of apartment with a retail podium within a 5-storey building named Camelia
with a GDV of CAD48.4 million will be launched in the 2nd quarter of 2014.
Trump International Hotel & Tower
Vancouver – 1151 West Georgia,
Vancouver, Province of British Columbia
TA Global is currently jointly developing Trump International Hotel & Tower Vancouver with Birkbeck Trust under a limited partnership arrangement with a contribution of CAD110 million by each party. The joint partnership to own and develop 1151 West Georgia is synergistic as the location is strategically adjacent to the FortisBC Centre, our 24-storey corporate office building in downtown Vancouver.
Trump International Hotel & Tower Vancouver is an iconic 63-storey luxury mixed-use development with a projected GDV of approximately CAD496 million. As at March 2014, the physical construction progress of the tower is at Level 23 and the building is expected to be completed in mid-2016.
The residential sales of Trump International Hotel & Tower Vancouver launched in the third quarter of 2013 has achieved 46.3% sales, valued CAD154.6 million as of April 2014.
Little Bay Residential Development Project, Sydney, Australia
Little Bay Cove in Australia is our first foray into residential development in Sydney with great development potential and prospects. The whole development of Little Bay Cove that originally started as collaboration will come under the stewardship of TA Global in second quarter of 2014 as Charter Hall, our alliance sponsorship partner, has sold its entire interest in theproject to a wholly-owned subsidiary of TA Global.
The overall project has a GDV of AUD600 million offering the community more than 3 hectares of open space and approximate 582 units of dwellings. Currently, development approval for the building of 66 townhouses and 224 low-rise luxury apartments has been obtained and these products are ready for sale and construction.
Works involving land remediation, earthworks, and service infrastructure are nearing completion in the 2nd quarter of 2014. The construction of Solis, a 45-unit luxury apartment which was 100% sold is expected to commence in the third quarter of 2014.
Menara TA One, Kuala Lumpur
The current occupancy rate of our corporate headquarters, Menara TA One is maintained at 90%, while the average rental rate is RM5.14 per square foot. Menara TA One is currently undergoing a RM20 million facelift to enhance the image of the building and includes upgrading works, relocation of its main entrance to Jalan P. Ramlee, new F&B outlets at ground level and roof top, and other enhancements. Renovation works are expected to be completed by November 2014
The retail and office suites at Subang Business Centre and Taipan USJ in Selangor continue to boast 100% occupancy rate and to generate good rental income for the Group.
Ativo Plaza- Bandar Sri Damansara
Ativo Plaza, the flagship project of the Bandar Sri Damansara development was completed in August 2013. The retail units on the ground and first floors have been retained to provide a stable income for the Group. The retail units at the plaza
achieved a respectable 81% occupancy rate, providing the community with facilities such as bank, supermarket and a wide variety of F&B outlets.
FortisBC Centre in Vancouver, Canada
The average rental rates of the FortisBC Centre, our Triple-A rated Office Tower in Vancouver increased by 1.0% per square feet in 2013. About 20% of the building's existing leases will be up for renewal between years 2014 and 2015. We anticipate a slight increase in our existing rental rates for these leases and this will have a positive impact on the overall revenue and average lease rate of the FortisBC Centre.
In tandem with the construction of Trump International Hotel & Tower Vancouver adjacent to it, the FortisBC Centre will be
upgrading its current conference facilities to a brand new 16,000 square feet of glass structure on its 3rd floor patio. The
seamless connectivity of FortisBC Center conference facilities to the Trump International Hotel and Tower will simultaneously uplift the corporate profile of FortisBC Centre and rental rates for its office tower.
The Movenpick Resort & Spa, Karon Beach, Phuket The hotel performed relatively well and saw an increase of THB21.5 million in total revenue and recorded a 79.5% occupancy rate for the year. The ADR and RevPar also increased by THB175 (4%) and THB233 (7%) respectively compared to year 2012. In 2013, the hotel was named as the Tripadvisor's Best Family Resort, received the Top Ten Awards Holidays with Kids and the renewal of the Green Globe Certification. Generally, the Phuket market is trading very strongly and with the initiatives undertaken by the hotel such as room refurbishment and increasing room count, we are confident that Movenpick Resort & Spa will continue to deliver stellar performance for 2014.
Radisson BLU Plaza – Sydney
As consumers continued to be price sensitive and in 2013, Sydney was caught in an extremely competitive environment. However, Radisson BLU achieved an occupancy rate of 87% and its Average Daily Rate (ADR) also grew by AUD11.5 to AUD230.5 this year. Its RevPar saw a significant increase of AUD13.2 versus the prior year due to an increase in the Occupancy and Average Rates. The hotel also received the TripAdvisor Award of Excellence 2013 and the Earth Check Australia Certified – Silver Benchmark Status. With an improving corporate market, Sydney's hotels will continue to enjoy occupancy rate of 80% all year round. There are plans to refurbish & upgrade the rooms to maintain the hotel's competitive
The Westin – Melbourne
Occupancy levels in Melbourne city's five-star venues soared in January off the back of the Australian Open and Ashes Cricket Tour, recording double-digit revenue per room growth with an average occupancy of 88.1% for the month. The Westin Melbourne maintained its competitive leadership with RevPar ranking of No. 1 for year 2013. The hotel performed extremely well with an increase of 8.7% in total revenue and 11.8% increase in its gross operating profit as compared to 2012. The Westin Melbourne plans to commence a series of capital projects during 2014 in offering quality products and services to sustain her competitive edge.
SINGAPORE - Swissotel Merchant Court
Demands for rooms in the hotel remained strong in 2013 that led to an all time high occupancy rate of 90%. However, the ADR and RevPar of the hotel took a minor hit with a decrease of 1.8% and 1.6% respectively compared to 2012 due to the strong Singapore dollar, which limited the hotel's ability to raise rates, and increased competition from within the city state and neighbouring countries. In order to remain competitive, upgrading works and refurbishing plans will be implemented this year.
CHINA – Swissotel, Kunshan
Swissotel Kunshan completed the year 2013 with an ADR of RMB606 and a RevPar of RMB289. The government's austerity drive in banning the use of 5-Star hotels for meetings and accommodation affected the hotel badly especially business opportunities from government-linked companies. Despite such challenges, the hotel managed to sustain and defend its position reasonably well for year 2013. The hotel plans to conduct some refurbishment in 2014 to maintain its competitive
edge. This includes modernization/upgrading of its rooms, ballroom and meeting rooms.
CANADA- Aava Whistler
Ongoing improvements and upgrades have kept Aava at the top of its competitors and ensure that the quality of its product surpasses guest expectations, and keeps it at the forefront of accommodation options in Whistler. Going forward into year 2014, Aava hopes to achieve better results by driving its occupancy, ADR, and overall revenue to new levels.
TA continues to play an active role as a responsible corporate company to improve the living standards of the poor and needy through many Corporate Social Responsibility ("CSR") activities. Through collaboration with various charitable organizations, TA has implemented numerous community projects to serve the under-privileged and help improve their quality of life.
On the corporate governance front, we will continue to improve on transparency and corporate governance processes in the interest of our shareholders.
Prospects and Outlook
Malaysia's economic growth prospects remain favorable in 2014 despite rising cost pressures from recent subsidy cuts. GDP growth is expected to accelerate to 5.2% in 2014 and maintained at 5% level in 2015 versus 4.7% in 2013, premised upon a recovery in external demand. Real exports are expected to grow by 3.5% in 2014 driven by electronic and electrical (E&E) and agriculture exports and resource-based products supported by steady demand from advanced economies and
sustained growth in regional economies. Consumer spending is projected to grow at a more moderate pace, underpinned by stable employment conditions, rising consumerism and sustained income growth. Implementation of the Goods and
Services Tax (GST) in April 2015 may spur domestic spending in the final quarter of 2014.
Equity markets could trend higher with an improving economic outlook in 2014, low interest rates and ample liquidity. Many markets are trading at historically high levels and the FBMKLCI valuation seems stretched. The gradual tapering of the US asset and bond purchases, possible increase in interest rate and foreign fund outflow will raise volatility in the domestic
equity market. Malaysian companies are facing the impact of subsidy cuts that raised production costs and lowered their profit margin. The short term negative implications on earnings will be felt but businesses will adapt to the challenging
The outlook for the property sector is expected to be less robust in 2014 due to various controls taken to dampen speculation and to rein in soaring prices. In the short term, cooling measures such as an increase in the RPGT, removal of DIBS, stricter
bank lending guidelines, new price threshold for foreign ownership will slightly weaken sentiment. The near term outlook for the domestic property market in general is still positive despite various obstacles. Demand is driven by the younger population and savvy investors will continue to buy properties that give a good yield and properties remain the best hedge against inflation.
A projected pick-up in the US economy would boost Canadian exports and business investments and Canada is expected to register a slightly higher economic growth of 2.3% in 2014. Factors such as rising employment gains, high net migration rate, low mortgage rates and stable vacancy rate augur well for our development projects in Vancouver and Richmond, Canada.
Australia's economic growth is expected to remain broadly stable at 2.6% and the unemployment rate unexpectedly fell to 5.8% in March 2014. Loose monetary policies have also boosted household spending and confidence. With this, Australia is
set to have a "boom" in residential properties. Dwelling values in key Australian cities rose by 10.6% year-on-year as at March 31, 2014. It was led by a significant 15.6% year-on-year increase in Sydney. The lack of supply of residential homes and unprecedented level of demand with record low interest rates are good signs for our Little Bay Cove project in Sydney.
We anticipate our hotels in Sydney and Melbourne to benefit from healthy economic conditions and buoyant tourism industry because hotel occupancies have already been pushed further into record territory. Similarly, improving economic
fundamentals and strong demand for tourism related services in Singapore, China and Thailand are expected to amplify the
income flow from our hotels in these countries.
As part of our growth strategy, we will proactively explore and evaluate opportunities for expansion of our hotel operations to further enhance the revenue contribution from the hospitality division. On the development front, we continue to seek opportunities to grow our land banks and property development business both locally and internationally. We are committed to maximizing returns for our shareholders via continuous cost improvement initiatives, human capital development, innovative product offerings and strategic investment decisions. Barring any unforeseen circumstances, the
Board of Directors expects the Group's performance to be satisfactory for the financial ending 31 January 2015.
On behalf of the Board, I would like to thank all our valued shareholders, business partners, clients, financiers and all regulatory bodies for their support and trust in our Group. I also wish to express my sincere appreciation to our remisiers, agents, management team and staff of TA Group for their loyalty, dedication and contribution that made 2013/2014 a successful year for the Group. Special thanks as well to every board member of TAE and its subsidiaries for the continued guidance and support throughout the year. I look forward to another fruitful year and seek continued support and cooperation from all stakeholders.
Datuk Tiah Thee Kian
Non-Independent Non-Executive Chairman