ONE of the oldest listed companies on Bursa Malaysia, Tanco Holdings Bhd seems to be turning over a new leaf. Going by the company’s recent announcements, the once debt-laden property company seems to be back on track to profitability, coupled with a clean balance sheet. It also sits on a valuable landbank and has other advantages that its owners can bring to the company.
First up, is its filing with Bursa Malaysia on Feb 28, that stated it had come to a final settlement with its main creditor Bank Kerjasama Rakyat Malaysia Bhd or Bank Rakyat. Having repaid the bank a figure of RM30.5mil. The filing states that Tanco now has rid itself of RM2.6mil in annual financing costs and more importantly, the situation has enabled the group to “free up multiple assets currently held as security by the bank”.
Tanco also said that the group’s bank debt now stands at only RM6.7mil. Noteworthy is that the loan was taken to finance the purchase of its main office building in Puchong, which was formerly Wisma S P Setia. The company had RM9mil in cash as at Dec 31, 2022.
Going back a little, Tanco had issued redeemable convertible notes (RCNs) beginning 2016 to raise some funds and this is probably what had partly helped them reach their debt-free status. The RCNs that were issued have all been converted into Tanco shares, which means there isn’t any more overhang coming from those holders.
Despite that, Tanco’s share price seems to have been holding up, trading at a range of 31 sen and 45 sen in the last six months and closing on Friday at 47.5 sen.
Another news piece that has put Tanco in the spotlight is a filing by Mah Sing Group Bhd on Jan 18 in which the property giant said it is buying two parcels of land measuring 8.2 acres in Puchong, Selangor for RM85.86mil. The vendor of that land is none other than the same shareholders of Tanco, namely group managing director Datuk Seri Andrew Tan Jun Suan and his four brothers, Benjamin, Christopher, Derrick and Edwin.
Recall that the senior Tan, Datuk Seri Tan Jing Nam (who founded Tanco) had passed away in May 2018, leaving his sons to run the company.
The vendor of that land is Millennium Acres Sdn Bhd, an entity that is owned by the Tan brothers. The website of that company shows that it owns other parcels of land at that area in Puchong which is being developed into Millennia City, a township with commercial and residential properties. It is understood that the Tan brothers own another 45 acres of land there to be developed.
In a filing with the stock exchange, Mah Sing said the land it acquired in Puchong has a potential gross development value of about RM726mil. The group intends to develop one of the parcels into a residential project and the other into a mixed-used development.
When contacted, Christopher Tan Khoon Suan, an executive director of Tanco Bhd, says he does not rule out that Tanco could be made the development company for some of the projects there on the land owned by the Tans.
Coming back to Tanco, it has long been known that its prized asset lies in the 480 acres of freehold beachfront commercial land in Port Dickson, overlooking the Straits of Malacca. Besides property development, the group also has a construction arm and a pharmaceutical business.
Tanco’s 2022 annual report describes the land as “strategically located along Jalan Pantai in Mukim Pasir Panjang and has the potential to be the largest integrated resort in Port Dickson. Dickson Bay is to be developed in various phases over 10 years.”
Notably, that land has not been revalued since 1993, with only a book value of RM218.5mil.
Its ongoing project there is the Splash Park serviced suites and water theme park, which occupies only a small portion of that landbank. Tanco has sold 70% of its units in its first tower (block two) made up of 413 service suites, with a gross development value of RM147mil. This tower will be completed by the middle of the year.
The group plans to build four more blocks of service suites plus one international hotel.
The units are being sold on a leaseback scheme with a yield being offered to buyers. Tanco is in partnership with Archipelago Overseas Pte Ltd – an Indonesian group with more than 200 properties under its range of hotel brands such as Kamuela, Aston, Alana, Harper, Quest, Neo, Favehotel and Nomad, according to Tanco’s 2022 annual report.
Meanwhile, on Feb 7, Tanco announced that it is buying 50.1% of a real estate sales company called Gplex Properties Sdn Bhd for RM20mil. Gplex runs an online sales submission and processing platform for real estate and also owns a real estate agency called Gplex Realty Sdn Bhd.
When asked about the deal, Christopher shares that Gplex has since participated in more than 300 sales and marketing property development projects, partnering with more than 100 strategic partners and notable developers in Malaysia.
“They have a dynamic management team that is able to show high sales conversion rates. With their sizeable sales and marketing team, it enhances their ability to enter into more development joint ventures with landbank owners. This in turn can be supported by our construction arm and access to cost competitive construction materials and supply,” he tells StarBizWeek.
The Tan brothers control around 52.5% of Tanco. Christopher adds that they privately own a granite mining and processing plant located in Tampin, Negri Sembilan.
“The mine covers an area of 187.6 acres with about 50.4 million cubic meters of raw material mineral resources which can be mined for more than 107 years,” he says.
He adds that the mine has an adjoining factory that is producing finished granite slabs similar in quality to those used in the Kuala Lumpur International Airport and parts of the government offices in Putrajaya.
He says by owning the mine, albeit privately, this is one of the advantages for Tanco’s construction arm.
“Tanco has access to secured supply and cost competitive raw materials such as armored rocks and granite. This minimises the challenges we face from raw materials price fluctuation,” he explains.
According to its 2022 annual report, Tanco’s construction segment is building new capabilities via infrastructure projects and supplying construction materials. It states that the total infrastructure contract value from projects awarded to the company in 2022 was RM53mil, and that Tanco will continue this expansion by bidding for several domestic infrastructure projects.
Last year Tanco won a number of sub-contractor jobs related to the construction of the East Coast Rail Link and the revenue of the group for the financial year ending June 30, 2022 (FY22) had soared by 224% or RM9.90mil, lifted by the increase in construction segment amounting to RM10.86mil during the period.
Meanwhile, Tanco’s pharmaceutical business is premised on its 2021 acquisition of a 51% stake in Herbitec (M) Sdn Bhd – a bioscience company producing herbal preparations derived from botanical extracts.
Notably, Herbitec has a patent on an antiviral pharmaceutical composition which, according to Tanco, has already shown good results in vitro studies against all four serotypes of dengue. Towards this end, the company has signed a research services agreement with Universiti Malaya to undertake clinical trials for the treatment of dengue, which is a leading cause of serious illness and death in mainly Asian and Latin American countries.
Sharing a bit of insight, Tanco says that it is making its dengue treatment, in the form of pills that are orally taken, up to four times cheaper and hopes that with increased affordability, dengue treatment can be more accessible to governments and individuals.
Christopher says the group has been growing capabilities to strengthen its core business, by strategically partnering with industry leaders and investing in growth businesses. “Our aspiration is for Tanco to be an investment holding company, potentially listing the business divisions to unlock further value for our shareholders”.
In the second quarter ended Dec 31, 2022, the group made a net profit of RM11.8mil as compared with a net loss of RM2.8mil in the same period a year ago. For the six-month period, net profit came in at RM10.5mil from a net loss of RM5.3mil previously.
At yesterday’s closing price, the company’s market capitalisation stood at RM881mil.