Tuesday April 27, 2010

Helpless landlords

ARTICLES OF LAW
By BHAG SINGH

Although there are provisions to allow landlords to recover overdue rental, there are limitations, too.

NOT everybody can afford to purchase a property to live in or to operate a business. Hence renting becomes a viable option for many. Renting involves the creation of a relationship between the landlord and the tenant. This may be created formally or informally, whether or not in writing.

The essence of the relationship is that for the agreed term, the tenant is entitled to enjoy the said possession. The landlord in return gets the rent.

If the tenant fails in his primary obligation, there will be cause for concern. If the tenant moves out, at least the landlord can mitigate his loss by renting it out to someone else. But the tenant may choose to stay, yet not pay rent.

Many a landlord in such a situation will feel frustrated. Going to the courts can be time-consuming and costly. Would it not be easier to just go in and chase the tenant out? Or could one not just disconnect the electricity and water supply?

Remedies

A landlord has three distinct remedies against a tenant in arrears with his rent. He may levy distress upon the tenant’s goods, which ultimately he may sell to pay off such arrears as remain unpaid.

Apart from that, he may sue the tenant on the covenant to pay rent, or he may seek to terminate the tenancy through forfeiture.

In addition, for any period for which he cannot claim rent, the landlord can get the liquidated damages, which would include claims for compensation for use and occupation, or an action for mesne profits.

Once the relationship of landlord and tenant has been created, the rights and obligations of the parties inter se will be governed by its terms subject to the general law. As the arrangement is a contract, its terms are enforceable between the parties in much the same way as any contract.

One of the rights conferred on the tenant is the landlord’s covenant that “the tenant paying the rent hereby reserved and performing and observing the several covenants on his part herein contained shall peaceably hold and enjoy the demised premises during the said term without any interruption by the landlord or any person rightfully claiming under or in trust for him.”

Distress

The right to distrain is an ancient remedy which may be described as the right to take another’s goods without legal process as a pledge for the satisfaction of a debt or claim. It is a remedy not confined to the law of landlord and tenant.

The Distress Act 1951 provides for this. It involves the application for a Warrant of Distress addressed to the bailiff directing the latter to forthwith distrain any removable property found by him on the premises named in the distress warrant.

The plus side of a warrant of distress is that it is obtained ex parte, meaning that the application to the court does not have to be served on the tenant before an order is made. The tenant will only know when the bailiff turns up at the premises to seize the property.

However, it must be noted that the purpose is primarily for the landlord to recover rent and not to get back possession of the premises. Once the goods have been seized and disposed of, the tenancy, unless terminated, continues.

Distress is not for recovery of possession. However, possession may be obtained where the premises are abandoned and there is no sufficient property seized with which the arrears can be paid. If so, an application can be made to authorise the bailiff to enter the premises and take possession.

Even then, the bailiff must in such cases affix in a conspicuous place or on the premises, a notice that possession thereof will be delivered to the landlord, unless within 10 days a judge, on the application of any person interested, otherwise orders.

Forfeiture and re-entry

There are instances where the landlord may seek to terminate the tenancy by forfeiture in exercise of a right to re-enter reserved expressly under the tenancy in the case of non-payment of rent. This could read as follows:

“If the rents hereby reserved ... shall be unpaid for (twenty-one) days after becoming payable it ... shall be lawful for the landlord at any time thereafter to re-enter upon the demised premises or any part thereof in the name of the whole.”

Of course, such a covenant may be enlarged in its scope to allow similar action to be taken in case of other breaches. Whilst this is an option on paper, the landlord’s right could be frustrated by other matters.

Where an effort to re-enter the premises is physically resisted, this could have a potential to cause a breach of the peace. In such a case, Section 99 of the Civil Procedure Code comes into play. A magistrate can act, if satisfied from a police report that a dispute is likely to cause a breach of the peace.

He can order the parties concerned to attend before him and put in written statements their respective claims with regard to possession of the premises in dispute.

He can thus make an assessment on which party should remain in possession. If the magistrate decides that one of the parties is in actual possession, an order declaring such party to be entitled to retain possession until evicted in due course of law, can be made.

Conclusion

Even where the tenant does not resist the re-entry because he is not present or otherwise, it would be prudent to make an inventory on what is found. Being accompanied by an independent party could be helpful against future claims by the tenant that some valuable property has gone missing.

There is, of course, the other aspect of cutting off electricity and water supply to the premises. Whether one is entitled to do so will depend not only on practical considerations but also on how the tenancy agreement is worded as well as the stage and point of time at which such action is taken.

Apart from the contract terms, one may also need to consider whether incorporation of such provisions permitting discontinuation of a utility is enforceable as it is contrary to public policy. This aspect could be the subject of a separate discussion.

Monday April 26, 2010

More foreign investors targeted for Nusajaya

By ZAZALI MUSA
zaza@thestar.com.my

UEM Land MD says good progress being made there

GELANG PATAH: UEM Land Holdings Bhd is targeting more international investors to participate in the development of Nusajaya this year.

Its managing director Datuk Wan Abdullah Wan Ibrahim said the company was eyeing investors from China, India, Europe, Singapore, South Korea and the United States.

“Nusajaya is progressing well and moving on the right track and we are confident of keeping the momentum going as planned,’’ Abdullah told StarBiz.

He was speaking at the launch of “Green Programme”, a collaboration between UEM Land and Universiti Kebangsaan Malaysia at SK Taman Nusa Perintis 1, near here on Saturday.

The Green Programme is outlined under the Nusajaya Green Plan launched in December last year to ensure a sustainable development of the country’s first economic growth corridor.

»Nusajaya will have enough content to attract investors and residents« DATUK WAN ABDULLAH WAN IBRAHIM

Abdullah said the company was unfazed by the Dubai World saga and now the Greece debt crisis as the two were unlikely to affect the global economy.

“Even during the global economic slowdown in the last two years, Nusajaya attracted interest from both local and foreign investors,’’ he added.

Abdullah said the company believed there were always opportunitie,s even during times of economic uncertainty, as there were investors and individuals with funds.

He said the company’s high-end residential projects, East Ledang and Horizon Hills, a joint venture between UEM Land and Gamuda Bhd, had attracted a large number of foreign buyers.

Abdullah said foreigners made up 65% and 56% of the buyers at East Ledang and Horizon Hills respectively and that the projects had recorded good take-up rates.

UEM Land is the master developer of the 9,308ha Nusajaya, the key driver of Iskandar Malaysia which was launched on Nov 4, 2006.

Nusajaya comprises eight catalyst developments – Kota Iskandar (Johor State New Administrative Centre), Southern Industrial and Logistic Clusters, Puteri Harbour Waterfront Development, EduCity, Medical City, International Destination Resort and Nusajaya Residences.

Nusajaya is one of five flagship development zones in Iskandar. The other four are the JB City Centre, Western Gate Development, Eastern Gate Development and Senai-Kulai.

Abdullah said works on infrastructure and several development projects in Nusajaya were on schedule and were expected to be completed in the next three to five years.

These include the RM1.4bil Coastal Highway linking Johor Baru city centre to Nusajaya, Asia’s first Legoland Theme Park, Indoor Theme Park @ Puteri Harbour, Marlborough College, Newcastle University Medical Faculty and Pinewood Studios.

“On completion of these projects, Nusajaya will have enough content to attract investors and residents,’’ he said.

Abdullah said it would be much easier to convince and attract investors to Nusajaya as they could witness the developments taking place.

He said another contributing factor was that Iskandar received continuous support and commitment from the Federal and Johor governments.

“The support from the Federal and Johor governments is important to ensure the success of Iskandar, which in turn will ensure that Nusajaya succeeds too,’’ Abdullah said.

He said other stakeholders, namely Iskandar Regional Development Authority and Khazanah Nasional Bhd-backed Iskandar Investment Bhd, also played crucial role in determining Nusajaya’s success.

Abdullah said its close proximity to Singapore was another added advantage for Nusajaya as it would not only able to attract Singaporean investors but also expatriates and multinational corporations there.

“As the master developer, UEM Land has an enormous task to ensure that Nusajaya succeeds and looking at its progress, we are well on our way to achieving it,’’ he said.

Tue Apr 06, 2010

GMG Global: a Wilmar in the making?
By VEN SREENIVASAN

A SOFT-COMMODITY giant with exposure to high-growth markets and commanding a premium over its peers because of its deep vertical integration which delivers a higher return on equity (ROE), more stable margins and stronger cash flows.

That is how Morgan Stanley described palm- oil giant Wilmar International in a 45-page report on March 26.

But this could turn out to be an apt description of mainboard-listed GMG Global as well three years down the road, or perhaps sooner.

Listed in 1999, GMG is the only pure natural rubber play on the Singapore Exchange (SGX). It has some 43,000 hectares of rubber plantation land in the African countries of Cameroon and Cote d'Ivoire (Ivory Coast), only half of which is now under cultivation. It has also bought into two processing plants in Kalimantan, Indonesia, with a total capacity of 55,000 tonnes.

In all, GMG produced some 75,000 tonnes of natural rubber last year. This will rise to over 100,000 tonnes this year, or two-thirds of existing capacity.

In October 2008, Chinese state-owned enterprise Sinochem Corp bought a 51 per cent stake in GMG for $265 million averaging 26.5 cents per share. Last year, it picked up its share of a $100 million rights issue, effectively bringing down its price in GMG to 17 cents per share.

Sinochem is a Tier 1 state-owned enterprise (SOE). It is also China's 10th largest company by revenue, a component stock of the Shanghai Stock Exchange index, and a Fortune Global 500 company for 17 years. With assets of more than 20 billion yuan (S$4.1 billion), it is also China's largest rubber player, supplying some 300,000 tonnes last year to 150 end-users, including multinational companies in the country. The company - which also supplied 100,000 tonnes of synthetic rubber to the Chinese domestic market in 2009 - currently controls over 10.5 per cent of the Chinese market for natural rubber (for scale comparison: the second biggest player supplies just 3 per cent). It wants to raise its market share to 15 per cent.

Meanwhile, China's thirst for natural rubber has grown an average of 10 per cent annually. Last year, it consumed 2.9 million tonnes, or almost 30 per cent of global natural rubber output. The only domestic rubber supply is some 500,000 tonnes from Hainan, in southern China. The rest is imported. The price of natural rubber has risen to its highest levels since mid-2008. Not surprisingly, China considers natural rubber a strategic asset.

This places Sinochem in a unique position. It also gives GMG a unique role as Sinochem's global platform for the production, procurement and trading of natural rubber. On its part, GMG has already expressed its ambition to be among the world's largest vertically integrated natural rubber players within the next 3-5 years. But to do so, its production will have to rise five-fold.

Unlisted Lee Rubber, with its long track record, already produces some 500,000 tonnes a year. GMG has to match that.

With over $160 million of cash in the kitty and virtually no debt, the company has the means to scale up. It has already bought into a second processing plant in Kalimantan this year and is on the lookout for more. Also, only half of its 42,000 hectares of plantation land in Africa is currently planted.

But GMG has to move beyond just production and output; it has to execute its vertical integration strategy, a la Wilmar. This means scaling up its rubber trading capabilities.

Fortunately, it has a powerful parent in Sino- chem which can help make all this happen. For comparison, there is no pure listed rubber play against which GMG can be benchmarked. But there are other soft-commodity players in palm oil which have similarities. Wilmar (with a market capitalisation of some $42 billion) has a price-book value of 2.7 times. Indofood Agri ($2.2 billion) is trading at 2.2 times book. GMG ($330 million) is trading at just 1.2 times book.

Back to Morgan Stanley's report.

Just over four years ago, the newly restructured Wilmar was trading at 80 cents per share. Today, the stock is up some nine-fold. Yet Morgan Stanley reckons it is still undervalued, and has a price target of $8.00 on the stock.

GMG is not a Wilmar; at least not yet. But it has the resources, cash, market and parentage to get there. It's a question of execution

Monday April 26, 2010

Rubber prices reach new highs

By HANIM ADNAN
nem@thestar.com.my

Rise in global demand, tight supply among factors

PETALING JAYA: Rubber is one of the hottest commodities traded so far this year with price rallies seen in most international rubber exchanges.

Tyre-grade Standard Malaysian Rubber (SMR 20) has also been hitting new highs particularly in the past three months and currently trading above the RM10,600 per tonne level.

According to Association of Natural Rubber Producing Countries (ANRPC) director-general Prof Djoko Said Damardjati, tightness in rubber supply would remain an issue amid an upsurge in demand from China and India for their booming auto and tyre manufacturing industries.

“Severe drought, the current wintering season as well as active replanting activities in most major producing countries could affect rubber output.

“Even the preliminary estimates from members of ANRPC indicate that the global rubber supply is unlikely to rise above 6% this year,” he told StarBiz recently.

ANRPC had earlier estimate that global rubber production could reach 9.5 milllion tonnes this year, up by about 6.3% from last year’s 8.9 million tonnes.

Djoko also expected rubber supply to remain tight until 2011. A large extent of existing yielding trees in major producing countries were planted in 1980s.

“Most of the trees planted have reached declining yield phase, thus the age composition of the existing yielding area is unfavourable for yield improvement,” he added.

Djoko noted that Indonesia and Malaysia had undertaken active replanting activities since 2005.

“I believe rubber prices will remain firm for quite some time until supply recovers, possibly by early 2012.”

Apart from the buoyant demand and drought-ridden supply, he said other factors influencing the rubber market included the weakening US dollar, volatility in yen and the increasing crude oil prices.

Members of the ANRPC countries account for about 94% of the total world natural rubber production.

Interestingly, more than 45% of global consumption of natural rubber is in China, India and Malaysia, which are the major consuming countries in the ANRPC.

ANRPC in its latest report said imports from China during January to February surged 63% for natural rubber and 118% for compound rubber compared with the same period last year.

During the same period, India posted a 17% increase in natural rubber consumption, given the large-scale capacity in its auto tyre manufacturing operation.

Meanwhile, Hwang DBS Vickers Research has also raised its 2010-2012 forecast rubber prices by 39% to 44% as its previous forecasts had not taken into account the price recovery on the back of stronger crude oil prices.

The brokerage said: “We believe strong demand recovery for the automotive sector in China and supply constraint due to ongoing conversions to oil palm and the wintering season between February and April would contribute to the jump in rubber prices.Our assumptions are factoring in 29% lower prices in the second half of 2010 compared with the first half.”

One analyst with a local stockbroking firm said the recent automobile industry statistics unveiled that the pick-up in the auto sector in China and the United States had been strong.

The automobile industry is the single biggest user of latex, easily consuming about 70% of the world latex production.

While some might argue that the price upsurge could be short-term given the traditional low supply wintering season, however, many feel that the current price hike was a reflection of strong demand.

“Even with a possible price reduction down the line, natural rubber prices are unlikely to ease to the low levels of December 2008 and January 2009,” he added.