Fraser & Neave Holdings Bhd Annual Report 2019

WWW . F N . C O M . M Y 168 F R A S E R & N E A V E H O L D I N G S B H D NOTES TO THE FINANCIAL STATEMENTS 4. INVESTMENT PROPERTIES (CONTINUED) LEVEL 3 FAIR VALUE The following table shows the valuation techniques used in the determination of fair values within Level 3, as well as the significant unobservable inputs used in the valuation models. Range and rate Properties Valuation technique Significant unobservable inputs 2019 2018 Commercial property Investment approach Estimated rental value per square feet per month (RM) – 1st to 5th year 4.00-5.50 4.00-5.50 – 6th year onwards 4.00-5.50 4.00-5.50 Capitalisation rate – 1st to 5th year – – – 6th year onwards 7.25% 7.25% Void factor – 1st to 5th year 50% 50% – 6th year onwards 10% 10% Capital expenditure reserve per square feet (RM) 1.00 1.00 Discount factor – 1st to 5th year 7.00% 7.00% – 6th year onwards 7.25% 7.25% Car park Direct comparison approach Value per car park bay RM30,000 RM30,000 Increase/(Decrease) in estimated rental value would result in higher/(lower) fair value of the investment properties assuming if all other assumptions were held constant. Increases/(Decreases) in the capitalisation rate, void factor, capital expenditure reserve and discount factor would result in lower/(higher) fair value assuming if all other assumptions were held constant. VALUATION PROCESSES APPLIED BY THE GROUP FOR LEVEL 3 FAIR VALUE The fair values of investment properties are based on discounted cash flows method and valuation performed by external, independent property valuers, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued. The valuation company provides the fair value of the Group’s investment property portfolio annually. Changes in Level 3 fair values are analysed by the management annually after obtaining valuation report from the valuation company. 5. PROPERTIES HELD FOR DEVELOPMENT Group 2019 RM’000 2018 RM’000 At cost 56,047 56,047 Properties held for development comprise: – Freehold land 49,783 49,783 – Development costs 6,264 6,264 56,047 56,047