MKH Berhad 223 Notes to the Financial Statements For the Financial Year Ended 30 September 2022 FAIR VALUE HIERARCHY (CONT’D) 46. Description of valuation techniques used and key unobservable inputs to valuation on investment properties measured at level 3 are as follows: (Cont’d) 2021 Property category Valuation technique Range Significant unobservable inputs Estimated average rental rate per square feet per month Education centre Investment method RM0.85 - RM1.25 Estimated outgoings per square feet per month RM0.05 - RM0.053 10% Void rate 5 Term yield 6.25% Reversionary yield 10% Void rate Estimated price per parking bay Office and shop lot Investment method RM17,000 Estimated outgoings per square feet per month RM0.25 6% Term yield Investment properties (Cont’d) 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) Outgoings rate lower/(higher) 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 differences. 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.
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