BINA DARULAMAN BHD (BDB) can be likened to the proverbial poor cousin as far as state-owned listed entities are concerned.
The stock, which is 55% owned by Perbadanan Kemajuan Negeri Kedah (PKNK) – the state’s investment board – is hardly on the radar of investors, unlike its more visible and well-followed peers like KPJ Healthcare Bhd and Kulim Bhd, which are controlled by Johor Corp Bhd.
Its market capitalisation stands at RM172.57mil based on Friday’s share price of RM2.32 versus KPJ Healthcare’s RM3.57bil and Kulim’s RM4.38bil. Terengganu’s state-owned listed arm TDM Bhd, meanwhile, has a market cap of RM1.45bil.
At the current price, BDB is trading at a 37% discount to its net tangible asset of RM3.71. Its lacklustre share price performance has linked it to market talk that it may be taken private. To this question, BDB group managing director Datuk Izham Yusoff declined to elaborate. “It’s a shareholder issue, one that should be directed to PKNK,” he says.
From a business point of view, however, Izham thinks it’s unlikely that BDB would be privatised, with reforms taking place in the company. “We are initiating change. For a start, we are expanding our property business outside Kedah with the hope that this will bring the company into the mainstream of the business world and attract investor interest,” he tells StarBizWeek.
Going mainstream, according to Izham, is also perceiving the stock as a listed entity that can operate anywhere, rather than to be known as a Kedah-based company.
Izham was appointed to the helm of BDB in February. His previous corporate stints include as chief executive officer of Percetakan Nasional Malaysia Bhd, KUB Malaysia Bhd and Amanah Raya Bhd. He has also served as board member of BURSA MALAYSIA BHD.
BDB’s main business is in property development, engineering and road works and quarrying, as well as tourism and hospitality.
Property is the company’s main revenue earner at 37%, and in terms of profitability contributed 45% of net profit in financial year 2013.
Road works came in second with a contribution of 36% to revenue, while the rest was from the construction and tourism sectors.
For the financial year ended Dec 31, 2013, it posted a RM21.1mil net profit on the back of a revenue of RM281mil. In the first quarter ended March 31, 2014, it recorded a net profit of RM5.17mil on a revenue of RM67.61mil.
Currently, the company has two main property projects in Kedah.
The first in Northern Kedah is called Bandar Darulaman, with a gross development value (GDV) of RM500mil spanning the next five years, while the other in Sungai Petani has a GDV of RM300mil and also spread out over a five-year period. BDB had pioneered Bandar Darulaman as a self-contained township in 1984.
Izham says the company’s first property venture outside the home state would be in the Klang Valley, where it is exploring joint-ventures with Klang Valley-based property developers. “We are looking at collaborating both ways, whereby we can also invite these developers to work on some of our projects in Kedah.” He declines to give details on the parties that the company is in talks with, but says they are a mix of private developers and Government agencies with land banks looking for partners to work with.
But is the timing right, considering that sentiment in the Klang Valley property market has turned cautious?
Izham does not think this is a dampener on the premise that “demand would be there if you have a good product to offer and hit the right price points. If you have these two factors, then one would be able to sell.”
He says that while the impending goods and services tax has created uncertainty in the market, he believes it is more a matter of people delaying their purchases before more clarity is shed on the consumption tax.
To facilitate the company’s venture outside Kedah, BDB had in June opened a corporate office in Kuala Lumpur. The company hopes its physical presence in the capital would raise confidence and commitment with future strategic partners for land and property development.
On how the company is benchmarking itself, Izham’s says BDB’s business philosophy is to instil a culture of achievement in the sectors it is involved in. “Property would be the main growth driver, but we will be moving a bit more into mixed-development projects, going forward, from our focus on residential.”
“We also want to develop our land bank on a timely basis and push for better marketing of our products.”
BDB has strengthened its land bank to 1,092ha, which is mostly in Kedah. Last month, it announced the acquisition of 485ha of land owned by PKNK for a total of RM204mil, which include parcels of land in Langkawi, Kubang Pasu, Kuala Muda and Kulim. This is expected to keep the company busy in the next few years.
Financially, the company aims to grow its revenue to RM500mil in the next three years and achieve a profit margin of 50% from the 10%-15% it is currently reaping.
Izham says with Kedah seeing a renewed development drive under the leadership of Kedah Mentri Besar Datuk Seri Mukhriz Mahathir, this will open up opportunities for players like BDB in property and road works.
“There is talk of a new international airport in Kedah that will augur well for the thriving northern region, plus the creation of more industrial park clusters like the Kulim Hi-Tech Park.”
He reckons that the state has one of the biggest upside potential primarily because it has been lagging behind in recent years.
According to official statistics that have been reported, Kedah’s per capita gross state product is at a little more than RM13,000, which is below other states, even Perlis.
It is only slightly better than Kelantan but less than a quarter of Kuala Lumpur’s RM56,000 and nearly a third of Penang’s RM34,000, according to news reports.
Aside from property, BDB hopes to further build up its road building segment and has identified another quarry in Southern Kedah to operate that can feed into the requirements of Nothern Perak as well.
The segment has been a steady performer, contributing RM100.7mil or 36% in revenue and slightly more than a quarter towards profitability.
As for construction, it is seeking to be less reliant on the property arm for jobs. “We have tasked the team to double the jobs from outside the group from the 10%-15% that we now win.”
One issue that has drawn scrutiny on the company is the RM330mil loan that its construction arm took for the construction of Kolej Universiti Insaniah (Kuin) campus in Kuala Ketil, Baling. Its construction arm, Kedah Sato Sdn Bhd was appointed by Kedah State Government to undertake the construction and development of a new permanent campus of Kuin under design and build concept. Izham explains that it is akin to a public-private partnership where we take out loan to specifically finance the Kuin construction of which the end customer is the state government.
“ The loan is syndicated by Bank Islam and Affin Bank and we have back to back agreement with the government on the repayment over 15 years for the construction and financing costs. This should put to rest the issue of whether we are servicing the loan on behalf of the state,” Izham says without revealing the amount the company receives from the state.
As at end-March, the company had a cash position of RM93.28mil.
From last year, BDB’s share price has trended up from the low of RM1.27 it touched in 2013.
But whether this is an indication of investors warming up to the stock is too early to tell.
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