Takeover by Philippine property giant seen putting local developer in sweet spot
ALTHOUGH the property market appears to be unattractive, MCT Bhd may be in a sweet spot.
The property development company is now in the midst of a takeover by Ayala Land Ltd, a real estate juggernaut in the Philippines.
To put things in perspective, Ayala Land is the biggest property developer in the Philippines. Its market capitalisation on the Philippine Stock Exchange is about RM53.69bil.
This is five times bigger than major property companies on Bursa Malaysia such as IOI Properties Group Bhd and SP Setia Bhd , which have market capitalisations of RM10.6bil and RM10.1bil, respectively.
But one question is why is Ayala Land interested in MCT, a property company that makes up 2% of the former’s market capitalisation?
According to MCT’s chief executive officer Jose Juan Z. Jugo, the objective of the acquisition is for Ayala Land to tap the Malaysian property market. Note that Jugo, Philippine national, was made MCT’s head honcho last year, a clear indication of Ayala Land’s increased involvement in MCT’s management.
“Now that MCT is a subsidiary of Ayala Land, MCT’s focus should be on how it can help its parent company achieve its corporate targets.
“While we will always remain a Malaysian organisation, we are now part of a much larger conglomerate and we have a very clear role to play in our parent company’s plans,” he tells StarBizWeek.
“Ayala Land’s objective for MCT is to harness opportunities in the Malaysian market,” he adds.
Following Ayala Land’s stake increases in MCT, market talk had focused on the possibility that the group would explore building a Makati City in Malaysia. Ayala Land is well known for that massive project in the Philippines, which is the financial centre of the country. Ayala Land is known for creating a 25-year urban development programme for Makati city since the 1940s.
MCT’s vast land bank in Dengkil is where this new city could be built, at least according to market talk.
But Jugo dismisses such an idea,
“There is no basis for this speculation. Our townships have their own master plans in place,” he says.
MCT has a total landbank of over 540.2 acres, of which almost 500 acres is in Dengkil and Cyberjaya. Only 20.4 acres of its landbank have been fully developed.
Ayala Land describes itself as being in strategic landbanking management, residential development, office space, hotel and shopping mall developments.
The firm has about 22,110 acres in Philippines, generating an annual revenue of RM11.3bil and a profit of RM3.96bil for the first nine months of 2017.
It launched almost RM5bil worth of projects during that period.
Ayala Land is part of the oldest conglomerate in the Philippines’ Ayala Corp with a rich history that can be traced back to the 1800s.
MCT specialises in mixed development projects that include retail, office, hotel, and mid-to-affordable residential units. It has several ongoing projects in OneCitySubang Jaya and Cyberjaya.
According to MCT, it has ongoing and soon to be launched projects with a combined gross development value (GDV) of approximately RM8bil and future projects with a conservatively estimated gross development value of about RM5bil.
Subhead: Ayala’s staggered buying into MCT
Ayala Land has been buying shares in MCT in several phases since 2015.
But it was last week that saw Ayala Land emerge as a major shareholder of MCT.
Last week Ayala Land, through its unit Regent Wise Investments Ltd, signed a share purchase agreement with Tan Sri Goh Ming Choon, a major shareholder of MCT, to buy 230.12 million shares, or 17.24%, for RM202.5mil cash, or 88 sen per share.
This brought Ayala Land’s holdings to 50.19% and firmly indicated its control of the local property developer.
The purchase has obliged Ayala Land to extend a mandatory general offer (MGO) to acquire all the remaining shares it does not already own in MCT for 88 sen a share.
However, according to an analyst, Ayala Land may want to maintain MCT’s listing status.
Ayala Land first emerged in MCT in April 2015, soon after MCT’s listing on Bursa Malaysia. It took up 9.16% stake, which was part of a placement of shares at a price of RM1.28 a piece. Six months later it bumped up its shareholdings in MCT to 32.95%.
Ayala Land says the increase in ownership of MCT will provide it with greater opportunity to take advantage of the growth potential and long-term prospects of the real estate sector in Malaysia and will affirm Ayala Land as a key player in the Asean property sector.
“This increase in ownership will strengthen Ayala Land’s commitment to enhance MCT’s operations and expand its business further,” Ayala Land said in a filing to the Philippine Stock Exchange last week.
With Ayala Land’s track record in developing large scale, integrated, mixed-use, and sustainable estates across the Philippines, the property firm says it believes that it is in a “highly capable position to boost the performance and enhance the value of MCT.”
Ayala Land had already been involved in the management of MCT since last year, following the appointment of Jugo as its chief executive officer, taking over the helm from Datuk Seri Tong Seech Tong who is one of the founders of MCT.
“Having Ayala Land as a major shareholder is a positive catalyst for MCT.
“However with all things considered, especially current market conditions, we remain neutral on the deal,” an analyst says.
Shares in MCT closed at 88 sen yesterday, giving it a market capitalisation of RM1.2bil.
Subhead: Philippine connection
The emergence of Ayala Land as substantial shareholder in MCT also marks the second Philippines-based company present on Bursa Malaysia.
The first was Petron Malaysia Refining & Marketing Bhd, which was acquired by Petron Corp – the largest oil refining and marketing company in the Philippines .
In 2012, Petron Corp bought a 65% stake in the Malaysian crude oil refinery business from ExxonMobil International Holdings for US$206mil (RM614.3mil) cash, or RM3.50 per share.
The deal had then triggered an MGO to acquire the remaining 35% stake.
Petron Corp had stated its intention to privatise Petron Malaysia, but failed to gain the necessary threshold to complete the takeover.
Currently, Petron Corp owns 73% of Petron Malaysia. Petron Corp is a unit of conglomerate San Miguel Corp.
Shares of Petron Malaysia have done very well in the last five years, rising almost four times. Petron Malaysia closed at RM13.24 a share yesterday, giving it a market capitalisation of RM3.58bil.
Under the Petron Corp’s management led by Ramon S Ang, Petron Malaysia implemented various initiatives including construction of additional storage tanks to reduce vessel delivery turnaround times and improve loading efficiency, among others.
Aside from the initiatives, the plunge in the price of crude oil has been a boon for petroleum refiners.
In 2013 and 2014, Petron Malaysia had been a loss-making company.
But that changed in 2015 and 2016 when Petron Malaysia posted RM221mil and RM236mil profits, respectively.
For the first nine months of financial year ended Dec 31, 2017, Petron posted a net profit of RM305.6mil, a 145% jump compared with RM124.9mil a year earlier.
With Petron Malaysia having done well following the entry of its Philippine owners, will the same happen for MCT?