TALK of a merger between Malaysia’s two biggest property developers has resurfaced, and again, it is inevitably being followed by some individuals and groups who bring up the race narrative.
It’s the usual suspects, one may say. Anyone looking at what they have posted on social media will find that they have not argued their cases rationally beyond the race prism.
The talk is still at an exploratory stage but let’s dive deeper and look at the numbers which really matter.
UEM Sunrise’s financials are a serious concern. It posted a loss of RM93.36mil in Q2 2020 while its total loss for H1 2020 now runs to RM115mil.
Its revenue dropped over 80% to RM112mil from RM1bil a year ago. Its net debt is RM3.39bil.
UEM Sunrise, which is 54 years old, has a net gearing ratio of 0.48 against Eco World at 0.64 but the latter is only six years old.
On share price performance, Eco World is trading at around 75% of its net tangible assets (NTA) whereas UEM Sunrise is hovering at around 76%.
A similar predicament is reflected in the share prices of other other property players, thus showing a lack of investor interest in the property sector. In simple English, no one is keen to put their money in property stocks now.
What can UEM Sunrise and Eco World offer to each other? Plenty, if they leverage on each other’s strengths. To borrow, the over-used cliché – a win-win situation.
UEM Sunrise is the largest landowner in Iskandar Malaysia and Eco World is the fastest growing developer there via four townships and three business parks, with cumulative sales of RM6.8bil in Iskandar Malaysia within a short span of six years.
Its chairman Tan Sri Liew Kee Sin knows Johor like the back of his hand as he is a Johorean and chief executive officer Datuk Chang Khim Wah had cut his teeth there as a developer.
Eco World is a brand name with strong positioning in the key Klang Valley market.
UEM Sunrise and Eco World International Bhd have presence in Australia and the latter has even established a strong brand presence in the UK with projects in central and Greater London.
A merger between the two with UEM’s rich legacy as a successful developer of integrated high-rise projects will create a sizeable entity and make Malaysia a serious player at the international level.
We need to look at how a merger can put Brand Malaysia on a bigger scale. It will certainly make international fund managers sit up and look at the merged company.
At the Malaysian level, it will ignite interest in the property market on the Bursa Malaysia and benefit all developers as a whole.
We need to ignore those who still persist in using the myopic race card, which in the end will only hurt UEM Sunrise. It may have land bank but it cannot continue to dispose of its assets to sustain its operations.
But if we still want to talk about the spin that Chinese-owned Eco World is swallowing Malay-owned UEM Sunrise, then let’s address this myth.
If the merger would become a reality, Khazanah Nasional, the country’s sovereign wealth fund of Malaysia, will still hold the majority at 43% and Liew will just hold 8.4%.
Let’s not insult anyone’s intelligence with the spin that Khazanah has not thought of who will have the controlling stake.
Eco World is a decent and reputable company with a sound management.
Yes, it has bought some parcels of land at high prices and it has gearing ratio issues but house owners know they can trust Eco World as a brand. It certainly does not need a bail-out.
If we want to go down the path of listing the number of Khazanah-owned companies that are bleeding – or to put it politely – can be better managed, we can draw up a list. Now, those are real bail-outs.
What will happen is that Liew and his team will effectively be working for Khazanah as the controlling shareholder if the merger does take place and any deal will not involve cash. It will be a pure share swap.
Malaysia, we have a problem. Our economy isn’t in the pink of health and do we still want to talk about race, or do we want to put our act together as Team Malaysia. Grow up please.
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