i-City project could be a model for other locations, says Hamad

  • Business
  • Saturday, 28 Mar 2009

THE intelligent business park project that I-Bhd is developing in Shah Alam can be constructed along similar lines by the company. It has the expertise and financial resources to do so.

It has made early tracks in establishing a record in this field which is now held back by the global recession. A successful completion of its RM2bil i-City will set it on the road to other states. Permodalan Nasional Bhd (PNB) CEO Tan Sri Hamad Kama Piah is convinced I-Bhd has developed expertise in this niche.

Hamad, who became I-Bhd’s non-executive chairman in February, says: “The i-City project could be a model for other locations and be replicated in other states, from an opportunity point of view.”

To a question on joining a company that’s small for the scale of PNB, he told StarBizWeek recently that it’s not a matter of small or big.

“It has acquired knowledge in developing properties with state-of-the-art facilities and it’s good to learn more about it,” he adds.

i-City boasts multi-telecommunications facilities and high-speed Internet access at a speed of 10 megabits per second (Mbps), which is 10 times the speed of Telekom Malaysia Bhd’s Streamyx service of 1Mbps or less.

The high-speed broadband will be useful for workers of companies in the information technology (IT), animation arts, law, architecture and banking sectors for which i-City is designed for.

In addition to the interest in i-City, Hamad says PNB has been associated with I-Bhd deputy chairman and controlling shareholder Datuk Lim Kim Hong for several decades.

In the 1980s and 1990s, this association was in Dreamland Holdings Bhd where both Lim and PNB were substantial shareholders. Lim sold his controlling stake in Dreamland some years ago. During his watch, Dreamland produced steady profits and dividends, attributes that attract PNB.

Lim, through his family-owned company Sumurwang Sdn Bhd, owns 58% of I-Bhd while PNB owns 18%.

In a re-entry into the corporate sector, Lim bought a controlling stake in Neico Industries Bhd which manufactured Sanyo electrical appliances. Neico was renamed I-Bhd but, after an unsuccessful attempt to expand the electrical appliances business, this division was phased out in 2007.

Its sole business now is its i-City project and a lot of cash.

I-Bhd has net cash of RM120mil, which exceeds the company’s total market value of RM89mil on Thursday.

The i-City project may need RM60mil of that for working capital but the rest of the development cost can be met by other means.

Eu Hong Chew, a director, says I-Bhd can tap a combination of some borrowings, internally-generated profits and capital injections by joint-venture partners.

In a joint venture with the Al Rajhi banking group, for instance, 80% of i-City’s phase one was sold to that group for RM95mil last year, with I-Bhd retaining the balance.

The company has used just 10% of the land for phase one, which leaves most of the rest of the 72-acre i-City to be developed.

While I-Bhd is cash-rich, it is not asset-rich in land as the i-City land was bought and is owned by parent company Sumurwang.

Eu says there is a supportive arrangement with Sumurwang such that I-Bhd pays for the land only as and when each parcel is developed. It is thus an asset-light business model.

In the development, I-Bhd follows a build-and-sell model. It does not sell prior to construction “and it doesn’t even have to borrow to build,” he adds.

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