Millennium Housing Developers upbeat on 2014’s first IPO
Friday, 10 January 2014 00:00
Millennium Housing Developers Ltd. (MHDL) that is leaving massive footprints island wide as Sri Lankas premier township housing and property developer, has got the green light from the Colombo Stock Exchange to be listed on the Diri Savi Board with an Initial Public Offering of 16 million new Ordinary Shares at Rs. 6 per share with an option of issuing a further 16 million Ordinary Shares at Rs. 6 per share if the issue is oversubscribed.
The IPO will open on 28.January 2013 and will remain open for 14 working days.
The Rs. 192 million will be used to power four ambitious new housing projects in Homagama, Ja-Ela Seeduwa, Wattala and Piliyandala consisting of 180 new housing units during 2014 and 2015. In addition to the above the company has identified three more locations to commence three more urban range housing projects consisting of around 150 houses within the Greater Colombo Area to meet the immediate housing demand for middle and upper middle housing requirements in close proximity to Colombo
Upward swing in housing sector
The housing sector’s steady upward swing now indicates a steady and sustainable medium and long term growth in the urban housing. It’s also defined by the banking sector as a positive growth industry, where during the last three years, loans to the private sector for housing sector has gone up to 18% with the interest rates for housing loans coming down creating more demand for the housing.
Millennium Housing Developers Ltd., expanding to offer 42 housing designs price ranging from Rs. 2.5 million up to Rs. 20 million in five different locations which will be expanded to nine different locations during 2014 and 2015 this will enable the prospective buyer to select a design which suits to his income in a location which is more convenient for his living and social requirements. MHDL embark on this new Urban Range concept using its own funds and funds generated from the IPO.
“From the inception to date for the last 14 years MHDL has constructed more than 2500 housing units catering to all income levels. The company maintained the steady growth in revenue and the Net Asset position. The company is blessed with dedicated set of skilled workers who have been working long time which help us to deliver quality houses in time. The company always uses quality construction materials in our construction work,” says MHDL’s Executive Director Sisira Weerabahu.
The MHDL Athurugiriya township project consists of 1,602 housing units catering for seven segments of the income levels providing various housing designs to suit their requirements. Ja Ela Millennium City and Millennium Villas consisting of 900 housing units cater to six different income brackets with a larger variety of house designs to select from. The ‘city’ type ambience with laid out parks for adults and kids, a trelliswork of wide road networks linking and running through and around these stylish mega townships, with swimming pool and club houses for their social functions and parties and mini shopping areas that cater to most of their daily lifestyles. All housing projects selected are in close proximity to malls, supermarkets, drug stores, communications, main transport services, schools and a whole gamut of services and conveniences all home builders seek.
MHDL housing projects were designed by reputed local and foreign architects who have wide experience in the needs and wants of these type of large housing projects.
"16 million Ordinary voting shares at Rs. 6 per share with an option of further Rs. 16 million shares to raise Rs. 192 million"
Until 2011, Millennium Housing Developers were concentrating mainly on large housing projects like Athurugiriya Millennium City Project - 1602 units and Ja Ela Millennium City - 900 housing units.
The company received large number of inquiries from the public on the availability of areas closer to strategic locations which are in line with their family requirements like closer to schools, work places, hospitals, religious and socio economic needs. The company in 2013 entered in to this new market of small gated communities with around 50 to 60 housing units named as Millennium Urban Range selecting three locations at Ja Ela Seeduwa, Piliyandala and Homagama with the IPO funds company would expand its projects to seven locations in 2014 to meet this new demand.
In addition with the recovery of global economy the demand for completed housing for the expatriate staff is in the increase and the company focus to meet this demand of completed houses in the existing projects to meet this growing demand.
MHDL has paid handsome dividends during last two years and its Net Asset value which represents the value of assets is growing steadily giving confidence to its shareholders. The market price and ratio shows that company returns to the investors are greater than most of the other sector players. This gives a positive signal to new shareholders that investing in Millennium Housing Developers shares are a worthwhile investment.
“All these factors make the tax-free investment option in MHDL shares a virtual gilt-edged security. That, combined with the fact that even original investments in MHDL have been recouped in less than seven years, makes this IPO an exciting risk-free, capital-growth investment product,” Weerabahu said.
Analysts are of the opinion that this offer can easily see investors shedding stagnant growth rate share holdings on the CSE to go in for MHDL shares and dont rule out a considerable over-subscription.
The Manager to the issue is Arpico Ataraxia Asset Management Ltd. and registrars to the issue are Corporate Arcade Ltd.
Studies have shown that Sri Lankans employed in several countries abroad are now earning twice as much and even more than they did five years ago, and with the post-conflict restoration of security in the country these Lankans abroad add up to a huge potential buying market that has sparked large condominiums in some parts of the country.
Housing stocks are seriously inadequate and land prices exorbitant but banks and finance companies are holding open doors for home builders. Hence, all factors point to a very steady growth spiral over the next ten years. All this makes investment in MHDL shares a solid investment option both as a high-return investment for small investors and as a hedge for huge corporate investors.
MHDL’s immediate plans are to complete the construction projects now on their drawing boards before end of 2014 by which time there will be more demand for urban and rural housing that incorporates some ultra-modern style, comfort and convenience at extremely affordable costs.
MHDL’s net asset value has meanwhile moved up over 30% from Rs. 320 million to Rs. 502 million as at end of September 2013 at the last reckoning.
The projects will include houses ranging from Rs. 4 million to Rs. 20 million to cater to demand across the entire social strata of income earners ranging from Rs. 25,000 a month to as much as Rs. 500,000 a month.
With MHDL also facilitating housing loans through several banks and financial institutions, employed persons ranging from even the low to higher income groups can easily afford any home of their choice. Prospective buyers who prefer the option of raising funds through stock brokers to go in for MHDL shares via this IPO can also now do since the government has abolished the 1% stamp duty charged on transferring shares to margin trading accounts to prompt margin trading operations to drive stock market growth.
The IPO comes against the backdrop of the MDHL group posting a phenomenal 75% growth in revenue during the financial year 2012-2013, up 28% on the growth for the previous financial year. Year 2010/11 revenue stood at Rs. 218,421,221.00; Rs.320,234,240.00 year ended 31 March 2012 and Rs. 560,486,930 in the financial year ended 31 March 2013.
Profits after tax soared from a mere Rs. 14.9 million in 2011 and Rs. 31.2 million in 2012 to Rs. 97.5 million in 2013.
Dividends paid to ordinary share holders have increased from approximately Rs. 15 million in 2011/12 to Rs. 20 million in 2012/13 with higher dividends slated for the end of the ensuing financial year.