AS Felda Investment Corp Sdn Bhd (FIC) solidifies its move into property development by taking control of Encorp Bhd, the group has earmarked three parcels of land to be developed including a 22-acre parcel in Kuala Lumpur.
The land currently houses the Balai Felda, Wisma Felda, Anjung Felda buildings and a handful of other surrounding buildings the Federal Land Development Authority (Felda) owns and has been using for about 45 years.
FIC CEO Mohd Zaid Abdul Jalil said Felda intends to redevelop the site, which is outlined by Jalan Semarak, Jalan Maktab and Jalan Gurney in Kuala Lumpur.
“We are still in the preliminary planning stage. We have yet to come up with the overall concept and design for the redevelopment,” he tells StarBizWeek. He says this would be a commercial development but the components have not been decided on.
Apart from the land in Kuala Lumpur, two other sites include 600 acres in Bukit Katil, Malacca and 2,000 acres in Pengerang, Johor.
“Again, we are still conducting our studies on the land and evaluating our options. These areas are primed for growth,” he says, noting that Malacca’s property development has been gaining momentum from its gradual urbanisation while Pengerang has the Refinery and Petrochemicals Integrated Development, or Rapid, factor.
However, Zaid denies that the land parcels would be injected into Encorp but do not discount the possibility of the company being roped in to help develop the parcels.
“Yes, we may consider bringing Encorp in just as a developer to develop Felda’s assets, if that gives the best returns to the Felda shareholders,” Zaid says, “We are considering all options from the financial and taxation point of views. We have to take into account how to declare dividends under the different structures.”
Although FIC is now in the driver seat for Encorp, its 49.45% shareholding means the returns from an asset transferred to Encorp may be diluted, compared to Felda owning the assets completely.
The objective of establishing FIC is, after all, to ensure ultimate parent Felda and the settlers get the maximum returns from unlocking the value of its assets.
Currently, these assets are held under Felda.
Rationalising its investments
FIC is in the midst of owning Felda’s hotel assets which is previously held by Felda Travel Sdn Bhd under Felda and Felda Global Ventures Holdings Bhd’s (FGV) rationalisation activities.
Felda chairman Tan Sri Mohd Isa Abdul Samad (pic) says in an interview that FIC’s main mandate is to undertake business activities which are non-plantation related. “And our focus has always been to enter the property development sector.”
He is confident that Felda will be a big developer because it has so much land to bank on.
“The hotels belong to FIC while the properties are under FGV. There is no conflict at all with FGV, which is our plantation business,” Mohd Isa says.
FIC’s existing core business is hospitality, but in the future, Mohd Isa says, the investment unit would be open to any business opportunities, even in oil and gas.
“We will diversify.”
Prior to the Encorp buyout, FIC has bought a 25% stake in technology company Iris Corp Bhd.
“Iris Corp has a lot of technology and intitiatives in the housing, industrialised building systems and agriculture areas. That’s why we bought shares, so our second generation can learn from them,” Mohd Isa says.
He adds that for Felda to set up its own business will take time as it was not easy for a plantation company to switch to other businesses. “Why not share with those who already have them. It doesn’t matter that we don’t have a majority share (in Iris), it is about trust and to fast-track our growth.”
Prior to FIC’s entrance into the company, Encorp already has a number of developments locally and overseas.
Encorp, a mid cap construction and property player, officially opened its first retail development, Encorp Strand Mall, last weekend.
The mall, which has 435,000 sq ft of net lettable area, is a joint venture between PKNS and Encorp on an 18.6ha leasehold parcel in the thriving commercial hub of Kota Damansara in Selangor.
The mall is part of the RM1.4bil Encorp Strand, a mixed development consisting of 265 business suites, 14 blocks of self-contained garden offices, 278 serviced residences and 2,500 parking bays.
Other developments on Encorp’s plate include Encorp Marina Puteri Harbour in Iskandar Malaysia, Encorp Cahaya Alam in Shah Alam, the Enclave Hillside Villas in Batu Feringghi, Penang and Residences on McCallum Lane in Perth, Australia.
FIC, the investment arm of Felda, has acquired all the shares in Encorp Bhd held by two major shareholders, Lavista Sdn Bhd and Pegang Impian Holdings Sdn Bhd, for RM239.72mil last Tuesday.
Lavista is to dispose of its 29.85% stake, as well as 8.33 million five-year warrants and 16.66 million five-year 6% redeemable convertible secured loan stocks (RCSLS) with a nominal value of RM1 each to FIC for RM133.69mil cash.
Pegang Impian, meanwhile, will sell its entire 19.6% interest in Encorp shares, 10.47 million warrants and 20.94 million RCSLS for RM106mil.
The move had triggered a mandatory general offer for the shares, warrants and loan stocks that FIC does not yet own in Encorp at RM1.55, 55 sen and RM1.55 apiece, respectively.
The MGO is not expected to go through, however, as Encorp’s share price has already superseded the offer price. It closed at RM1.64 yesterday while its warrants and loan stocks closed at 80 sen and RM1.61.
Encorp group chief executive officer Yeoh Soo Ann is said to leave Encorp following FIC’s takeover. He, together with chief operating officer Mohd Ibrahim Masrukin, had engineered a management buyout of the company last July.
Both executives control Encorp through Lavista, which they had acquired from long-time Encorp shareholder and executive chairman Datuk Seri Effendi Norwawi.
Yeoh is believed to be joining an unlisted company with his former associates.
These reports do not seem to worry FIC, it seems.
Mohd Isa says to this: We have a lot of talent. I don’t see any problem (if Encorp staff leave). The key thing is that FIC becomes the major shareholder.
He explains that Encorp’s land bank was not the focus in the acquisition of the property developer. “We have landbank, but we needed a vehicle for our property development business. If we were to set it up ourselves, it would take time.”
For Felda, Mohd Isa adds, Encorp’s already has the structure. Felda would just need to make a few changes in the administrative side.
He notes that due diligence for the takeover is ongoing, to be completed in two to three weeks.
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