MKH Annual Report 2018

202 MKH Berhad Annual Report 2018 42. FAIR VALUE HIERARCHY (Cont’d) Property category Valuation technique Significant unobservable inputs Range Investment properties (Cont’d) O ce and shoplot Investment method Estimated average rental rate RM4 per square feet per month Estimated price per parking bay RM17,000 - RM28,300 Estimated outgoings per square RM0.25 feet per month Term yield 7.5% Education centre Investment method Estimated average rental rate RM0.80 per square feet per month Estimated outgoings per square RM0.04 feet per month Term yield 6.00% Sinking fund 2.00% Void rate 2.00% The estimated fair value would increase/(decrease) if: • Estimated rental/average rental rate per square feet per month were higher/(lower) • Estimated price per parking bay per month were higher/(lower) • Estimated outgoings per square feet per month lower/(higher) • Rent growth rate per annum were higher/(lower) • Void rate lower/(higher) • Term yield rate lower/(higher) • Reversionary yield rate lower/(higher) • Sinking fund rate lower/(higher) • Construction price per square feet higher/(lower) Direct Comparison method Under the direct comparison method, a property’s fair value is estimated based on comparison of current prices in an active market for similar properties in the same location and condition and where necessary, adjusting for location, accessibility, visibility, time, terrain, size, present market trends and other di erences. Fair value of properties derived using direct comparison method have been generally included in Level 3 fair value hierarchy due to the adjustments mentioned above. The most significant input into this valuation approach is price per square feet of comparable properties. Investment method In the investment method of valuation, the projected net income and other benefits that the subject property can generate over the life of the property is capitalised at market derived term yields to arrive at the present market value of the property. Net income is the residue of gross annual rental less annual expenses (outgoings) required to sustain the rental with allowance for void. Cost method of valuation In the cost method of valuation, the market value of the subject property is the sum of the market value of the land and building. The value of the building is assumed to have a direct relationship with its cost of construction. The cost of construction is then adjusted to allow for cost of finance, profit and demand to reflect its profitable present market value. FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2018 NOTES TO THE FINANCIAL STATEMENTS