First the protest then came the virus

  • Corporate News
  • Saturday, 15 Feb 2020

Little known is that Pos Malaysia Bhd also has a stake in the game. Its loss-making subsidiary, Pos Aviation Engineering, is also in the provision of aircraft maintenance and engineering services. However, the prospects of Pos Aviation seem to have lit up.

First the protests, then came the virus

FOR years, the Malaysian government has been trying to dispose of the Malaysian consulate office in Hong Kong, which it had bought 40 years ago in 1980 for HK$212mil.

Datuk Seri Najib Razak tried disposing it for RM1.1bil when he was the Finance Minister via direct negotiations.

Current Finance Minister Lim Guan Eng tried, via a tender, with a target price of about RM1.6bil (HK$3bil) back in 2019.

But the months-long street protests scuttled those plans. Somehow, the timing of that Putrajaya briefing session held by the Finance Ministry (MoF) among local and foreign real estate agents seemed somewhat ill-timed.

The MoF briefing was held in the middle of the year. The street protests started three months earlier in March, and if not for little infectious coronavirus, christened by the World Health Organisation (WHO) as Covid-19, those often-times violent protests-turned-riots would still be going on.

All the resources of Hong Kong and the backing of China failed to stop the protests and riots but a little virus sent everyone indoors.

But the various events have also resulted in a drop in the price of the consulate office at 50, Gloucester Road in Wan Chai, one of Hong Kong’s busiest districts.

According to a source in Hong Kong, the value of the building has dropped by at least 11% compared with mid-2019. With the WHO saying that the current outbreak may just be the tip of the iceberg and may become a global pandemic, the global horizon seems cloudy.

According to documents viewed by StarBizWeek, that 27-storey building has a total gross floor area of about 130,000 sq ft, of which about 90% comprises of office space while the rest are retail shops.

It was valued in October 2017 at HK$1.73bil, or RM921.63mil, which is about 40%, or about RM680mil, less than what Lim was eyeing back then in 2019.

Over the week, Hong Kong’s second-largest Chinese newspaper Sing Tao Daily reported that Shamrock Hotel in Nathan Road, the main thoroughfare in Kowloon, is finally likely to be sold.

That property is said to have a far superior location than 50 Gloucester Road.

Shamrock was valued for about HK$3bil in March 2018. With the hotel sector facing a serious challenge today due to the outbreak, the deal may be completed at HK$1.9bil, Sing Tao reported. The new owner plans to turn the hotel into a medical doctor’s consultancy centre.

IGB’s plan to sell stake in UK-based JV firm lapses

The sale of IGB Bhd’s UK asset, Black Pearl Ltd, is uncertain.

In a filing with Bursa Malaysia this week, the property developer - famous for its Mid Valley City development in Kuala Lumpur - said the heads of agreement signed on Dec 3 last year for this lapsed on Feb 3.

According to IGB, “the purchasers have requested for a further extension of time but no agreement has yet been reached on the terms of the extension”.

“IGB will make further announcements in relation to the proposed transaction if and when required, ” the company said in the stock exchange filing.

To recap, in December last year, IGB and its partner Tower Ray Ltd disclosed that they were selling their UK-based 50:50 joint venture Black Pearl for £235mil (RM1.27bil) to Hero Inc Ltd, Staycity Ltd and BSW Land and Property Ltd.

Black Pearl owns a freehold plot in London that was purchased for about £122mil in 2014.

The market was generally positive on the exercise because it was an opportunity for the asset-rich group to unlock value.

The view was that some of the proceeds could have gone to pare down borrowings, reward shareholders, which would benefit minorities too, or possibly re-deployed to buy cheap and distressed assets during a downturn.

What next for Pos Aviation?

The regional airline maintenance, repair and overhaul (MRO) market is quite competitive. There are not many players who specialise in the sector.

Within Malaysia, the better-known names are Destini Bhd and Airod Sdn Bhd, which is a subsidiary of the National Aerospace & Defence Industries. Across the causeway, SIA Engineering Company Ltd (SIAEC) is a force to be reckoned with.

Little known is that Pos Malaysia Bhd also has a stake in the game. Its loss-making subsidiary, Pos Aviation Engineering, is also in the provision of aircraft maintenance and engineering services.

However, the prospects of Pos Aviation seem to have lit up. In the latest development, SIAEC is proposing to take up a 49% stake in Pos Aviation for RM10.09mil. This is based on Pos Aviation’s unaudited net assets of RM20.59mil.

SIAEC is no small fry in the highly competitive MRO business. Why is it taking up a stake in Pos Aviation? What is the game plan going forward, should the deal be sealed?

At the moment, SIAEC already has a large share of the MRO market to service the commercial airlines in the region. Almost all the airlines use the services of SIAEC. It has a client base of more than 80 international carriers and aerospace equipment manufacturers.

SIAEC provides maintenance at 36 airports in eight countries. Apart from MRO works, it also provides maintenance services in 36 airports located over eight countries.

It provides airframe and component services on the most advanced and widely used commercial aircraft in the world.

With its impressive credentials, SIAEC can partner any company in the region. Why choose Pos Aviation? What value does Pos Aviation add to SIAEC? What is the ultimate objective of the joint venture (JV)?

The proposed JV is certainly something that should be watched.

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IGB , property , Hong Kong consulate , sale , Pos Aviation ,


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