Tradewinds in talks with Arab investors

By Sharen Kaur

FUNDING FOR MEGA PROJECTS: Arabs seeking a majority stake in company's developments, say sources TRADEWINDS Corp Bhd's major shareholder is in talks with rich Arab investors to help fund its developments in Kuala Lumpur, Johor and Langkawi, sources said.

Negotiations are currently centred on the Arabs seeking a majority stake in the developments, they added.

The investors are also asking for a minority interest in Tradewinds, a property development and investment group controlled by Tan Sri Syed Mokhtar Al-Bukhary.

"Tradewinds has several projects, including sizeable landbanks in Johor and Langkawi which it plans to develop over the next five to seven years. The shareholder, however, does not want to borrow from banks and prefers Arab money.
"In return, the Arabs want to control the developments that they fund and have a minority interest in Tradewinds. The terms and conditions and methods of funding are being discussed," a source told Business Times.

Tradewinds' existing projects include the upgrading of Menara Tun Razak and the development of Tradewinds Centre at Jalan Sultan Ismail, both of which are projected to cost over RM4 billion, the source said.

The group is demolishing the 40-year-old Crowne Plaza Mutiara Hotel and 33-year-old Kompleks Antarabangsa to make way for the Tradewinds Centre, which has an estimated gross development value of more than RM7 billion.

Tradewinds has said it will redevelop the 2.8-hectare site on its own over seven years.

The project will comprise Grade A+ offices, a 24-storey corporate block, a large-scale 14-storey medical centre, retail offices, serviced apartments and hotel.

The centrepiece will be a 65-floor skyscraper and 54-storey residences, complimented by a central plaza.

At Menara Tun Razak, Tradewinds is upgrading the 35-storey office tower and constructing a new 40-storey office tower adjacent to it.

Meanwhile in Langkawi, Tradewinds owns about 60 hectares of land there, which has been earmarked for mixed tourism-related developments.

It also has a 360ha landbank in Iskandar Malaysia, Johor.

Asian Pac sees RM70m a year from Imago

By Sharen Kaur
Asian Pac Holdings Bhd expects Imago Mall, its new retail venture in Sabah, to contribute up to RM70 million, or more than 25 per cent, to its yearly revenue from 2016.

Syarikat Kapasi Sdn Bhd, a unit of Asian Pac, is developing KK Times Square Phase 2 in Kota Kinabalu. The project comprises the 800,000-square feet Imago, signature offices and 631 luxury apartment units.

Asian Pac chairman Tan Sri Megat Najmuddin Megat Khas said Imago, which has 300 retail lots, is expected to rake in between RM60 million and RM70 million per year in the first few years of operation.

This is based on current market rates and rental yields in Sabah, he said at a media briefing, here, yesterday.

"We are leasing all the units to control the tenant mix. It would boost our recurring income and annual contribution to the company," he said at a press conference, here, yesterday.

For the year ended March 31 2013, Asian Pac reported a net profit of RM17.63 million on RM103.24 million revenue.

The bulk of the net profit and revenue was from property developments in Kepong, Johor Baru and Kota Kinabalu.

Its property investment segment generated income from the leasing of land and office space in Kepong Entrepreneurs' Park. There was also income derived from carpark operations.

Megat Najmuddin is bullish that the annual retail spending in Kota Kinabalu will exceed RM1.4 billion.

"The Kota Kinabalu International Airport is the second busiest airport in Malaysia with roughly three million tourists a year. Most of them are from South Korea, Japan, Taiwan and Hong Kong and so there is good catchment for Imago," he said.

Retailers such as Parkson Corp Sdn Bhd, DNP Clothing Sdn Bhd, Bonia Group, AEON Fantasy (Malaysia) Sdn Bhd and Valiram Group have agreed to set up shop at Imago, selling local and international brands.

MAS - Maximising resources

By Sharen Kaur

MALAYSIA Airlines (MAS) group chief executive officer Ahmad Jauhari Yahya said the airline will utilise its existing aircraft and workforce to grow its business.

He said the national airline, which has about 20,000 workers, will improve productivity and load factor.

The carrier has 122 planes, of which 90 fly for MAS and the rest, for MASwings and Firefly. MASwings and Firefly are profitable subsidiaries.

"The aviation industry in Asia is the fastest growing in the world. Traffic volume is projected to increase by five per cent next year. We aim to grow in tandem with the industry," he told Business Times in an interview recently.

He said the challenge for MAS is to grow profitably and the key is to address sticky costs.

For next year, MAS will look at cost reduction and drive efficiency through strategic procurement and processes, among others, he said.

"The airline business is still a tough environment and it is not easy to recover lost market share. MAS used to hold 58 per cent of market share in 2005 but by end-2011, it fell to 28 per cent. We lost close to 50 per cent of the market share. This meant MAS did not grow while the market grew."

However, Ahmad Jauhari said the carrier has started to build its market share, which is now at 32 per cent.

"We are increasing the number of seats flying out of the Kuala Lumpur International Airport (KLIA). We would like to be the biggest carrier out of KLIA," he said.

MAS has also been able to grow its passenger traffic this year by 28 per cent.

The airline's third-quarter load factor stood at almost 85 per cent, a historic peak for the 41-year-old carrier, as it focused on stimulating demand with lower average fares.

However, the load factor improvements have come at the expense of yield, pushing MAS back into the red in the third quarter ended September 30 2013.

Ahmad Jauhari said capacity is piling in Asia, with Lion Air and AirAsia, for example, buying more planes and this has put pressure on yields.

"MAS has not raised its capacity for many years. We are getting new planes to replace the older ones. Passengers like the new planes as they are more reliable and comfortable," he said, adding that for MAS, the younger fleet of aircraft translates into fuel efficiency gains.

He said by end-2014, MAS' average fleet age will be six, making it the airline with the youngest fleet in Asia.

SP Setia chief to quit next year?

By Sharen Kaur

SP SETIA Bhd's Tan Sri Liew Kee Sin will step down as president and chief executive officer, a year short of his contract that expires in May 2015, or earlier.

Liew, who joined SP Setia at the age of 37, has been with the company for 17 years.

Speaking after a media briefing here yesterday, Liew indicated his intention to step down soon and not wait until 2015.

Rumour has it that Liew will leave the company around the Chinese New Year period next year. In May 1 2014, he would have served SP Setia for 18 years.

Under his leadership, SP Setia shot to fame globally after it won the rights to redevelop the billion-ringgit Battersea Power Station project in London, together with the Employees Provident Fund and Sime Darby Bhd.

SP Setia has 27 ongoing projects, including 15 slated for launches from next year worth a combined RM102 billion.

There is speculation that Liew will have keen interest in up-and-coming property developer Eco World Development Sdn Bhd, in which his eldest son Liew Tian Xiong is a director.

Liew did not deny nor confirm the talk.

"SP Setia has been around for 25 years. It is the biggest property developer in Malaysia by net profit and sales. Five years ago, we expanded overseas and the projects are all bearing fruit.

"We have a great team, and this has led SP Setia to become what it is today.

"I have decided to move on. It has been a good journey for me."

Early this year, Liew was listed by Forbes as Malaysia's 38th richest man with a net worth of US$230 million (RM743 million).

He still owns 67.79 million shares in SP Setia, or 2.76 per cent. Based on yesterday's closing price of RM3.09, the stake amounts to RM209 million.

With Liew's departure, the next big question is what will happen to SP Setia, although it has been said that the baton will be passed on to current chief operating officer Datuk Voon Tin Yow.

"We have set a good growth path for SP Setia where its earnings will strengthen, at least for the next three years," he said.

SP Setia sees three years of record profit

By Sharen Kaur

SP Setia Bhd expects record net profits for the next three years, led by its current unbilled sales of RM9.64 billion, which are at the highest level, and new launches.

For the fiscal year 2013, SP Setia achieved sales of RM8.24 billion, which were 50 per cent above its sales target of RM5.5 billion and doubled 2012's figure of more than RM4 billion.

This led to the group recording a pre-tax profit of RM570.34 million on a RM3.06 billion revenue for the full year. The profit and revenue went up 0.5 per cent and 21 per cent, respectively.

"This is the best ever year for SP Setia," said its president and chief executive officer Tan Sri Liew Kee Sin here yesterday.

SP Setia has 27 ongoing projects worth a combined RM31 billion.

"Our profit before tax had marginally increase because earnings from the projects in Melbourne and London can only be recognised upon completion. Cost is incurred, but not profits," he said.

Liew expects a jump in pre-tax and net profits from 2016 onwards, as contribution from the London and Australian projects flows through.

However, the challenge would be to keep costs low, he said.

There is cost pressure due to a reduction in petrol subsidies this year and the electricity tariff hike next year.

"We need to manage our profits," he added.

Liew said SP Setia will be more prudent when it comes to new property launches.

He is expecting the property market to slow down next year as the government raises the real property gains tax, among others.

"We have overseas projects, which will even out any troubles here. Locally, we need to see the impact of new measures before we do any launch," he said.

MAS may axe bleeding routes

By Sharen Kaur

MALAYSIA Airlines (MAS) may axe services to several unprofitable destinations to cut costs, said group chief executive officer Ahmad Jauhari Yahya.

He, however, did not say which routes MAS is reviewing.

It is learnt that routes to Europe and the Middle East are being studied by the key management.

"If there are routes that are not performing, we will remove them from the network. We don't want routes that are bleeding as it will drag down earnings.

"At the same time, we will review new opportunities. If we think there are profitable routes, we may fly there," he told Business Times in an interview last week.

He said if MAS were to remove any routes, it will work with its code-sharing partners to fly passengers there.

MAS has more than 25 code-sharing agreements with carriers such as Garuda Airlines and Cathay Pacific.

"For MAS, it is not just about reducing costs but increasing partnerships with other airlines and establishing new code-sharing agreements.

An airline cannot do everything these days. Partnerships and code-sharing are the way forward." The loss-making carrier flies to some 100 destinations.

Last year, it cut eight loss-making routes, namely, Langkawi-Penang-Singapore, Kuala Lumpur-Karachi-Dubai,KualaLumpur-Dubai- Damman, Kuala Lumpur-Surabaya, Kuala Lumpur-Johannesburg, Kuala Lumpur-Cape Town-Bueno Aires, Kuala Lumpur-Dubai and Kuala Lumpur-Rome.

Ahmad Jauhari said the carrier will increase flights to key regional cities so as to tap the strong growth in Asia.

"It is going to be an aggressive market and we are going to be as aggressive as possible to sell seats. But, at the same time, we will manage our costs. We will make sure our cost structure is very sharp." MAS incurred a loss of RM830.25 million for the first nine months of 2013 and does not expect to make a profit for the full year.

Despite the loss, its cash position remains strong at RM5.4 billion.

Turnaround on right track, says MAS chief

By SharenKaur
Published in NST on December 4, 2013

SILVER LINING: National carrier wants to continuously address cost issues and embark on better marketing and product positioning

THE Malaysia Airlines (MAS) chief is hopeful that the national carrier will turn around in fiscal year 2014 as its strategy to improve profitability is bearing fruit.

Group chief executive officer (CEO) Ahmad Jauhari Yahya told Business Times in an interview yesterday that MAS’ three-year business plan,introduced in late-2011,is on the right track.

However, some quarters chose to criticise the national carrier as it is still in the red.

In the third quarter ended September 30 2013, MAS reported a loss of RM375.4 million, despite a 12.4 per cent improvement in revenue to RM3.91 billion.

For the cumulative nine months, MAS’ net loss widened to RM830.25 million from RM483.96 million previously.

“One of the things thrown to us by many quarters was that MAS is not making money. At the end of 2011, MAS was bleeding very heavily.

It bled to the tune of RM2.5 billion. “The board developed quite a complex business plan to solve very deep issues that were

plaguing the airline. The business plan was not the first to address continuous losses.

“Many teams had tried before with many business plans that included asset bundling and asset sale. Despite all that, MAS is still losing money.

“It’s not one single solution, but there are multitude of things that we need to look at. We have set ourselves a target of three years to reach some form of business stability and make profits,”
he said.

Ahmad Jauhari said there have been many anticipated events, which had put pressure on margins.

These included higher fuel and non-fuel variable costs, the weakening ringgit against the US dollar, geopolitical events, and higher prices for parts and components because of foreign
exchange.

“This business is quite complex. Thus, it requires a complex solution. What we hope to do is structurally address the costs, (and) how we market and position our products and services.

“This is not a one-off thing. There are a lot of core issues we need to address for the airline to be competitive in the market. 

Aviation is a global business. We have to compete globally and we have the responsibility to fly the Malaysian flag,” Ahmad Jauhari said.

Moving forward, he said one of the biggest challenges for MAS will be cost management. 

“(The year) 2013 is an important lesson for us. We know what worked and what didn’t. What did not work was rising costs, so we have to look at that next year. We will address some of the fixed and variable costs and spread costs over a wider capacity,” Ahmad Jauhari said.

Re-engineer KTMB'

By Sharen Kaur
KUALA LUMPUR: Keretapi Tanah Melayu Bhd (KTMB) will either need to be re-engineered or allow private parties to fully utilise the electrified double-tracking (EDT) project from Seremban to Padang Besar.

Railwaymen Union of Malaya (RUM) president Abdul Razak Md Hassan said KTMB can also buy new trains or lease them to help maximise utilisation of the EDT line.

However, the loss-making national company has no government guarantee and funding to buy or lease trains, Razak said.

"The EDT lines from Seremban to Gemas and Ipoh to Padang Besar will require at least 100 locomotives. KTMB only has 44 locomotives in operation, which are being utilised in the Klang Valley.


"The best thing for KTMB to do right now is to get a private party to re-engineer the company and supply locomotives at reasonable cost with a quick delivery action plan," Razak told Business Times.

Business Times reported yesterday that the EDT line between Seremban and Gemas is completed, but may not be fully utilised until there are enough trains.

This will result in opportunity loss for KTMB, which runs into millions of ringgit every year, he said.

The government is spending RM16 billion to develop the EDT line from Seremban to Padang Besar.

The stretch between Seremban and Gemas, worth RM3.45 billion, was awarded to India's Ircon International Ltd in 2007. Ircon is expected to hand over the job to KTMB next month to facilitate operation from early next year.

The stretch between Ipoh and Padang Besar, worth RM12.5 billion, is undertaken by MMC-Gamuda Joint Venture Sdn Bhd. This line is expected to complete by the middle of next year.

KTMB president Datuk Elias Kadir did not reply to Business Times queries.

Officials from the company, meanwhile, said KTMB should get private parties like YTL (Corp Bhd), which has cement business to utilise the tracks.

"YTL can get its own supply of locomotives and wagons and pay trackage fee to KTMB," they said.

Opportunity loss for KTMB?

By Sharen Kaur

NOT FULLY UTILISED: Seremban-Gemas EDTP line ready but there are not enough trains, sources say

THE electrified double-tracking project (EDTP) between Seremban and Gemas is completed, but may not be fully utilised until there are enough trains, sources said.

This would result in opportunity loss for the national railway company, Keretapi Tanah Melayu Bhd (KTMB), they said.

The government is spending RM3.45 billion to build the Seremban-Gemas line covering 98.27km for KTMB. India’s Ircon International Ltd was awarded the job in 2007.

There is also a RM12.5 billion allocation to build the line from Ipoh to Padang Besar, which is undertaken by MMC-Gamuda Joint Venture Sdn Bhd.

Business Times understands that Ircon will hand over the project to KTMB next month to facilitate operation from early next year.

“There will be opportunity loss for KTMB as the tracks are completed, but there’s lack of trains. There is no order for new trains to serve the stretch between Seremban and Padang Besar.

“KTMB is using its existing fleet mostly for the Klang Valley double tracks. It has trains that can’t function as they were damaged due to accidents,” said a source.

KTMB operates 34 six-car sets and 20 threecar electric multiple unit commuter trains.

Fewer than 10 trains operate between Seremban and Rawang, Seremban and Rembau, and Kuala Lumpur and Ipoh.

The government early this year ordered 10 units of six-car electric train sets from China for about RM500 million. However, these trains will be only delivered in phases starting from
end-2014 to serve the double tracks between Kuala Lumpur and Ipoh.

“Opportunity loss for KTMB could run into millions of ringgit each year. It takes three years for new trains to be delivered upon order,” the source added.

Meanwhile, Ircon has been issued a certificate of practical completion (CPC) although the Seremban-Gemas EDPT is not fully commissioned.

“The CPC was issued two months ago by KTMB to avoid Ircon from paying penalty for late delivery. Although Ircon will hand over the job next month, it is six months behind schedule,” the source said.

Ircon has completed and commissioned the line from Seremban to Sungai Gadut. Between Sungai Gadut and Gemas, the line is only commissioned up to Rembau.

Ircon is still undergoing testing and commissioning on the systems from Tampin to Gemas, he said.

Bina Puri upbeat on 2014

By Sharen Kaur

RM2.5B BOOK ORDER: Jobs from O&G, construction sectors to provide boost

  Bina Puri Holdings Bhd is upbeat that its book order will hit RM2.5 billion by end 2014, with potential jobs from the construction and oil and gas (O&G) sectors providing the boost.

“We have a positive outlook on the two sectors. There are a lot of projects coming up, such as building police stations, bridges, government buildings and quarters, as well as civil
works.

“In Sabah and Sarawak, we are eyeing pipe laying contracts in the O&G sector,” group managing director Tan Sri Tee Hock Seng told Business Times in an interview recently.

Tee said Labuan will be a new market for Bina Puri in terms of O&G and infrastructure development opportunities.

Bina Puri is also expected to win two midsize power plant projects in Thailand within the next three months, Tee said.

It also anticipates to win a government project in Brunei before Chinese New Year in 2014, he said.

“My personal KPIs (key performance indicators) for Bina Puri is to see the group achieve new standards in the construction sector and win more jobs here and overseas,” Tee said.

Tee founded Bina Puri in 1975. It started out with construction activities and today, it is also involved in property development, highway concessions, mining, power and O&G.

Bina Puri’s unbuilt book order now stands at almost RM2 billion.

Its current most prominent job is the Kuala Lumpur International Airport 2 terminal project worth RM997.2 million, a joint venture with UEM Construction Sdn Bhd.

Bina Puri’s portion is 40 per cent, or about RM400 million. Tee said the terminal project will be completed and handed over to Malaysia Airports Holdings Bhd by the end of this month.

In terms of property development, Bina Puri has projects with a gross development value of RM3.1 billion, spread across Malaysia.

Bina Puri chairman Tan Sri James Foong Cheng Yuen said recently the group aims to seal new joint venture deals in the property, construction, mining and power sectors here and overseas within the next four months.

It has been exploring new business opportunities in Malaysia, Thailand, Brunei and Iraq.

In the last two months, the group has inked four joint-venture agreements to undertake three projects in Malaysia and one in Thailand.