Short Position

  • Business
  • Saturday, 27 Jul 2019

No more fundraising for Boustead?

A YEAR ago, Boustead Holdings Bhd would have seemed like a company that would have embarked on a fundraising.

There was a change in leadership, it was suffering huge losses and the change in government meant that the company, which is owned by Lembaga Tabung Angkatan Tentera (LTAT), would no longer get as many deals as previously from the government.

However, the draw-down of a RM650mil facility under an Islamic medium-term note (IMTN) programme earlier this week suggests that the diversified group will not be in dire need of fresh funds in the near future at least, contrary to market perception.

The group, which has interests in the plantation, property, pharmaceutical, heavy industry, finance, and trading and industrial sectors, drew down the RM650mil from a RM2bil sukuk programme.

The company in a filing with the stock exchange said that the proceeds raised from this issuance would be utilised to refinance existing borrowings and financing.

Boustead slipped into the red last year, pulled down by its plantation, heavy industry and property divisions. It blamed the challenging market conditions, which resulted in weaker contributions from the plantation, heavy industry and property divisions, for the poor results. For financial year 2018 (FY18), Boustead registered a loss of RM469.2mil. This compares with a net profit of RM690.14mil in FY17.

The loss marked a turning point of sorts for Boustead. It indicated that the company was prepared to bite the bullet and brace the corporate world under the new government.

Notably, since December last year, there have been changes in the management and board composition of Boustead. The biggest was the departure of its long-standing deputy chairman and managing director (MD) Tan Sri Lodin Wok Kamaruddin, who had served as MD since 1991.

Amidst the changes, there were growing concerns with regard to the company’s debt levels. With this latest round of IMTN, it looks like the company is in better financial stead.

In April this year, its executive director Datuk Seri Ghazali Mohd Ali said that the group is optimistic of a return to profitability and that it had laid out plans that included the disposal of non-core assets and paring down stakes in some of its listed companies. He also said the company had plans to improve cost and operational efficiency. Time will tell if these bear fruit. Shareholders, for one, are waiting to see what happens.

Legal remedy for Felda land deal

SYNERGY Promenade Sdn Bhd, the master developer of the KL Vertical City (KLVC) development, is finally taking Felda and its subsidiary, Felda Investment Corp Sdn Bhd (FIC), to court over the prolonged delay in the project

The controversial KLVC project started in 2014 when Synergy Promenade entered into a development agreement with FIC to develop the land, which is owned by Felda, on Jalan Semarak. The agreement involved the transfer of 16 parcels of land measuring 16.06 acres to Synergy Promenade and its unit, Synergy Promenade KLVC Sdn Bhd. The transaction valued the land at RM270mil.

The grandiose KLVC project will feature three towers, including Felda’s KLVC Tower 1A on 24 pieces of land, as well as Felda’s 75-storey office tower together with a 70-storey four-star hotel and apartment tower, with an estimated total gross development value (GDV) of RM2.5bil.

Under the development agreement, Felda will receive a minimum amount of RM500mil or 10% of the GDV, whichever is higher, of which Synergy Promenade had made a part payment of RM10mil to Felda.

Synergy Promenade also had initially obtained a development order from Dewan Bandaraya Kuala Lumpur (DBKL) approving a plot ratio of 1:7.

But following its appeal to DBKL, it obtained a development order with a new plot ratio of 1:10. The increased plot ratio enhanced the value of the land.

Given the new plot ratio of 1:10, the valuation report then had estimated the value of the project at around RM8.3bil, in which Felda will receive about RM830mil as part of the development agreement. This is higher compared to the earlier valuation of the land estimated at RM155mil.

However, as of today, only one out of the 24 plots of land stated in the development agreement has been delivered. Synergy Promenade has commenced work on that piece of land and has completed the piling work for a 68-storey office tower.

Synergy Promenade needs the land free of encumbrances to finance the development of the KLVC project. Felda, on the other hand, has gone through several changes and is going through investigations for alleged abuse of power by the previous management team.

The developer maintains that there was no corruption, fraud and wrongdoing in connection with the Felda land transfers and contends that the delay was due to the latter.

The developer also contends that the land transfer is to facilitate the financing required to complete the mammoth KLVC project.

After five years, the dispute has gone to the courts, which is probably the best option to resolve the issue once and for all.

All systems go for Genting Malaysia

IT’S all systems go for Genting Malaysia Bhd in relation to its Genting Integrated Tourism Plan (GITP).

Last year, the plan ran into problems when Twentieth Century Fox Licensing & Merchandising, a unit within Fox Entertainment Group, withdrew from granting the rights to use certain intellectual property rights associated with Fox theatrical motion pictures for the design of the theme park under GITP.

Genting Malaysia filed a suit in response to Twentieth Century Fox withdrawing from the agreement and the US-based company filing a claim of US$46.2mil (RM193.6mil). Genting Malaysia counter-sued the US companies, claiming more than US$1bil (RM4.2bil).

At about the same time, Genting Malaysia also sought a judicial review on a decision by the Finance Ministry to amend the terms of some tax incentives given to the company for its investments in the GITP project.

Earlier this week, Genting and Twentieth Century Fox came to a settlement with a restated agreement between the two parties. As part of the deal, Genting Malaysia is allowed to use certain Fox intellectual properties for the outdoor theme park, whose plans are updated.

At the same time, Genting Malaysia also withdrew its application for a judicial review on the amendments to the tax incentives against the Finance Ministry.

Now, it’s all systems go for Genting Malaysia that is counting on the GITP as the catalyst to attract more visitors up the hill. The GITP is an integral part of making Genting Malaysia an attractive destination, staving off the challenge from other casinos in Singapore and even Cambodia.

Under the original plan, the GITP was to be based on a design catered to the intellectual property rights of the Fox Entertainment Group. It would have been the only one with such a design in the region and given Genting Highlands the cutting edge.

Now, although the GITP would see lesser influence from the Fox Entertainment Group, it should still be a selling point for Genting Malaysia.

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