IT would appear to be a new beginning for Kumpulan Europlus Bhd (KEuro) now that the shareholding structure and boardroom appointments in Kumpulan Europlus Bhd have been finalised. With a sterling set of investors backing the company, KEuro can now focus on the execution of its RM6bil West Coast Expressway (WCE).
Prior to the recent appointments, KEuro has been without a chief executive officer (CEO) since 2012. Except for its financial year (FY) ended Jan 31, 2012, the company has been loss making from FY09 to FY13.
On Tuesday, Mamee-Double Decker (M) Bhd managing director Datuk Wira Pang Tee Chew and his brother, Datuk Wira Pang Tee Nam emerged as substantial shareholders of KEuro with a 9.08% stake or 52.05 million shares via their holdings in United Frontiers Holdings Ltd, a British Virgin Island incorporated company.
On Feb 17, filings with Bursa Malaysia showed that Tee Chew had been appointed non-executive director for KEuro.
That same day, KEuro announced a slew of boardroom changes, namely the appointment of Datuk Neoh Soon Hiong as its CEO. Lyndon Alfred Felix was appointed chief financial officer. Tan Sri Krishnan Tan, the former boss of IJM Corp Bhd, is also likely to join the board because the decision to push on with the WCE was largely his brainchild.
Currently the second largest shareholder of KEuro is MWE Holdings Bhd, a company controlled by Tan Sri Surin Upatkoon with a 24.68% stake in the company. Last year he bought a 22.15% stake from KEuro’s substantial shareholder Tan Sri Chan Ah Chye for RM155mil.
IJM is the largest shareholder with a 25.1% stake.
So surely it isn’t just the WCE that attracted MWE and the Pang brothers to put their money in KEuro. After all, concessions’ profits will only kick in at least five years down the road.
While the WCE will be providing the long-term revenue stream for the company, it is the potential of KEuro’s 1,879-acre Bandar Rimbayu mixed development in Shah Alam that appears to be the sweetener.
Also, it is this mixed development with an RM11bil gross development value (GDV) that will likely bring the company back to the black in FY14.
The first two phases launched last year recorded sales of RM600mil, with take-up rates of 100% and 80% respectively.
KEuro presently has three main assets: the WCE project, the 40% stake in Bandar Rimbayu development and a 30% stake in associate company Trinity Corp Bhd (now known as Talam Transform Bhd).
Since receiving confirmation from the Government to commence work on the WCE, KEuro has been given 5 years to complete the project effective from Dec 20, 2013.
With time now ticking, construction work on the highway in the Selangor stretch is expected to commence in April and take three years to complete. This portion of the highway will contain a section of elevated highway.
The WCE project spans Banting in Selangor to Taiping with 233 km of tolled highway (including 40 km of highway to be constructed later).
It is a build-operate-transfer project with a concession period of 50 years. This concession period will be extended a further 10 years if the agreed targeted internal rate of return is not achieved.
A government support loan (GSL) of RM2.24bil will be provided at an interest rate of 4% per annum subject to separate negotiations and an agreement to be executed with the Finance Ministry.
Of the RM6bil cost of the WCE, land acquisition cost of up to RM980mil will be borne by the Government.
During the GSL tenure, 70% of excess revenue will be utilised as repayment of the GSL. After settlement of the GSL, the ratio will switch to 30:70 between the government and WCE if the targeted IRR is not achieved and 70:30 if the actual IRR is more than the targeted IRR.
Previously, West Coast Expressway Sdn Bhd chief executive officer Datuk Neoh Soon Hiong (now CEO of KEuro) said that five out of a total of 11 work packages would be dished out in April.
“If work is to start by April, this would mean that the tender process will be taking place soon. Being an equity owner of the WCE, IJM is obviously a beneficiary and is likely to be appointed the project manager and main contractor,” says one construction analyst.
Analysts have stated that IJM is eyeing some 70% of the RM5bil project, hence potentially boosting its order book to RM6bil from RM2.5bil as of September 2013.
While KEuro owns 80% of WCE, the rest is held by Road Builder (M) Holdings Bhd, a unit of IJM Corp.
“The commencement of work is definitely positive for KEuro. It is a beneficiary of the WCE story and will eventually see a new revenue stream from the concession. For now, its earnings are still very lumpy. Revenue contribution from property will also smoothen out its earnings,” says one construction analyst.
Certainly, for the third quarter to Oct 31, 2013, KEuro’s net loss reduced to RM7.13mil from RM7.52mil previously, boosted by contribution from its property segment. This was on the back of 51% drop in revenue to RM2mil. For the nine-month period, net loss increased marginally to RM11.6mil from RM11.3mil. This was on the back of a 23.52% drop in revenue to RM10.32mil. As of the period, the company had RM160.91mil cash in its coffers.
KEuro is now in the midst of implementing its rights issue, having obtained the approval of shareholders to raise more than RM400mil to kickstart the WCE.
KEuro will be placing out 429.74 million rights shares and 214.87 million free detachable warrants on the basis of three rights shares for every four existing KEuro shares held and one warrant for every two rights shares.
Property wise, KEuro has Bandar Rimbayu, which is being developed by Radiant Pillar Sdn Bhd, a 50:50 joint venture between KEuro and IJM Land Bhd’s subsidiary IJM Properties Sdn Bhd.
In January, shareholders approved a plan to sell 10% equity stake in Radiant Pillar to IJM Land for RM52.5mil cash. Once the sale is complete, KEuro will only own 40% stake in the project.
After the successful launches of its first two phases, it will launch its third phase in early 2015 with a GDV of RM400mil. Phase one of Bandar Rimbayu was launched in March followed by phase two in August.
Bandar Rimbayu’s GDV of RM11bil will be spread over the next 10 to 12 years.
The township is accessible via three highways – Elite, Kesas and the South Klang Valley Expressway.
AmResearch said the original land cost for Bandar Rimbayu is only RM5 per sq ft compared with an average of RM18 per sq ft Tropicana Corp paid for 1,172 acres near Bandar Rimbayu (total cost of about RM1.3bil).
Did you find this article insightful?