Aerospace business to unlock value of land in Serendah

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  • Saturday, 24 Feb 2018

PLANS are afoot for UMW Holdings Bhd to unlock the value of its land in Serendah, an area 33km north-west of the Kuala Lumpur City Centre.

“We have some 860 acres of land in Serendah. The plant for the Rolls-Royce engine fan case took up around 30 acres. This is actually an asset that we have and we would like to unlock its value. We would like the land to be recognised as a high-value manufacturing park,” president and chief executive officer Badrul Feisal Abdul Rahim tells StarBizWeek.

The group’s aerospace facility that manufactures engine fan cases with about 4,000 components, for use in aeroplanes, is situated there.

“We have been working together with government agencies to promote the park, namely the Malaysian Investment Development Authority, the Malaysia External Trade Development Corp and the International Trade and Industry Ministry and they have been very cooperative. We are making progress in courting major global players to consider relocating their (operations) to Serendah.”

Badrul Feisal says this is a long-term plan for the group that would take up to 10 years to be realised.

“The land is sitting on our balance sheet, so by having the aerospace plant helps to serve as a catalyst to further unlock value for the group without the need to invest in new companies or industries. It would enhance returns from the assets on our balance sheet.

“We are talking about marketing, promoting and if we have interested parties to develop it. Potential investors can come in with us or by themselves. This is an important agenda to the Government. We can either sell or develop the land here,” he adds.

At the beginning of this month, T7 Global Bhd’s joint venture with the United Kingdom-based high-value manufacturing company Kilgour Metal Treatments Ltd, announced the setting-up of a RM200mil specialised metal treatment plant for the aerospace industry in Serendah.

“If there are parties who would like to own the land, we would be open to selling it if the price is right. For T7 Global, we have sold it. But there are investors who would want to be asset-light when they relocate to Malaysia without having the need to invest in a plant. We can build it for them while they lease it,” he says.

The company is still negotiating with the Government on the possibility of providing tax incentives to potential companies that would like to relocate to Serendah.

“This is a massive development and it could take up to 15 years. We would like to have quality players move here and not just a company that is not doing any high-value manufacturing. Selling land is easy, but selling it to the right party is challenging. Hence, we need time for the right investors to come here,” he says.

Meanwhile, the group’s aerospace venture, which is parked under its manufacturing and engineering (M&E) business segment, is expected to be the fastest-growing segment moving forward as it is growing from a low base.

“M&E to the group’s contribution is now relatively small. The lubricant business has been contributing about RM15mil-RM20mil in pre-tax profit per year, while automotive components (Kayaba business) have been providing about RM30mil in pre-tax profit. The combination of the two has always been about RM40mil to RM45mil.

“In financial year 2018 (FY18), the introduction of a new plant (for Rolls-Royce) involved a lot of startup costs. Last year, M&E was in the red but moving forward, this segment (due to the aerospace venture) will be a bigger contributor compared with the lubricant and automotive component business segments.”

Losses at the M&E division will taper off in FY18, break even in the following year and make a profit in FY20.

“We are expecting that by FY21, the aerospace plant would run at optimal production to contribute significantly in terms of pre-tax profit for the M&E division. The M&E division has in the past years been mostly making commodity products with low margins.”

Badrul Feisal hopes that the foray into high-value manufacturing for aerospace will open doors for the group to venture into similar industries such as advanced transportation, medical devices or turbines.

“With the skill set we have built, there is a potential for further value-creation for UMW,” he says.

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Business , UMW , aerospace , Serendah , land , monetise assets


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