Reject offers to privatise KTMB, union urges govt

By Sharen Kaur

Published in NST on January 13, 2014

RAILWAYMEN'S Union of Malaya (RUM) hopes government intervention in Keretapi Tanah Melayu Bhd (KTMB) will stop private parties from putting up proposals to take over the company.

KTMB - which is involved in freight, intercity and commuter train services - is loss-making and due to that it has been the subject of a takeover target by several parties for more than a decade.

Year-on-year the Ministry of Finance Inc allocates money to the ailing company to help run its operations. Last year, more than RM150 million was given to KTMB.

RUM president Abdul Razak Md Hassan said the union's 3,600 members are against proposals by any private parties to take over KTMB.

Business Times recently reported that Gamuda Bhd may submit a proposal to MMC Corp Bhd to jointly take over KTMB operations in a deal worth more than RM5 billion.

Gamuda and MMC, a company controlled by Albukhary Foundation, are in discussions over the matter.

"We hope Prime Minister Datuk Seri Najib Razak will decide soon and reject all offers put forward by private parties to privatise KTMB. If a decision to dismiss offers to privatise Malaysian Airline System Bhd (MAS) can be made immediately, why not the same for KTMB?" Abdul Razak said recently.

In August last year, former prime minister Tun Dr Mahathir Mohamad suggested that privatisation could be the answer to make MAS profitable again, after several unsuccessful efforts to turn the national carrier around.

He said as long as MAS remained a government-linked company, it would be difficult for the airline to achieve high-profit status.

Najib, however, dismissed calls to privatise MAS as efforts to turn the airline around have begun and are beginning to show promise.

Abdul Razak reiterated that KTMB can be profitable without privatisation.

"KTMB needs a strong leader with industry knowledge, and has developed trust and credibility. He must also be able to share the company's vision with absolute clarity," Abdul Razak said.

RUM is staging a protest next month to put pressure on its current president, Datuk Elias Kadir, to resign.

Elias was appointed KTMB president in May to help turn it into a profitable entity.

He told Business Times a few months after his appointment that he aims to grow non-rail revenues, slash costs and improve efficiency and train delivery.

Abdul Razak, however, estimated losses for this year to be around RM220 million.

For fiscal year 2012, KTMB recorded a net loss of RM284 million on revenue of RM361 million.

New York on MAS' radar?

By Sharen Kaur
Published in NST on January 22, 2014

BOOSTING EARNINGS: National carrier studying several profitable routes, sources say

MALAYSIA Airlines (MAS) plans to resume flights to several destinations this year, including New York, to boost its earnings, sources said

It is understood that MAS is studying several profitable routes, including flying to new destinations and increasing frequency of existing routes with high potential.

MAS flies direct to more than 60 destinations and a further 800 destinations in more than 150 countries via its oneworld partners.

For the flight to New York, MAS is expected to fly there via London using the A380 aircraft.
MAS had stopped all its New York flights in 2009.

From next month on, it will be flying to Krabi, Thailand, four times a week.

MAS will also fly to Vancouver, Canada, via Narita, Japan, this year through a code share agreement with Japan Airlines (JAL).

Sources said the national carrier is also evaluating existing loss-making routes in a bid to trim cost.

Speculation is rife that MAS may cut Los Angeles and Frankfurt from its network and work with its code-sharing partners to fly passengers there.

MAS has more than 25 code-share agreements with carriers like Garuda Airlines, Cathay Pacific and JAL.

Its group chief executive officer Ahmad Jauhari Yahya did not reply to Business Times queries on the matter.

Last month, he had said MAS might axe services to several unprofitable destinations to cut costs.

"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 had told Business Times.

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.

Analysts said in order for MAS to improve its revenue and net profit, it must have better yields and passenger loads per plane.

In terms of cost, they said MAS should relook at all its existing contracts, from maintenance, catering and equipment to aircraft, as well as rental income and leases.

"MAS should reduce unnecessary headcount, especially at the management level. If the management does not meet the KPIs (key performance indicators), then they should be asked to leave.

"There are better ways to manage MAS. They should hedge jet fuel costs and have more code-sharing. MAS should also look at forex gains and losses and manage that properly," the analysts said.

MIDF Amanah Investment Bank Bhd analyst Chua Boon Kian believes that MAS still has a long way to go to break even.

He said despite the load factor and operating results achieving tremendous improvements, it is largely offset by the declining yield base.

"MAS also faces the problem of low staff productivity and escalating competition from other regional carriers, which will put a dent on its share price and earnings," Chua added.

NCT to launch RM400m development in Kedah

By Sharen Kaur

sharen@mediaprima.com.my

KUALA LUMPUR: NCT Group plans to launch a new commercial project in Sungai Petani, Kedah, next year, which is expected to generate some RM400 million in gross development value (GDV).

The project is a joint venture with the Kedah state government, said NCT founder and group managing director Yap Ngan Choy.

Yap told Business Times that he is bullish about the project because of several major developments taking shape in Kedah.

The state government has identified six projects to boost the income of poor families and improve the livelihood of rural folks, such as developing idle land for agricultural activities.
Kedah, which is the poorest state in Malaysia, plans to also implement the proposed Yan Petroleum Industrial Zone (Zipy).

Zipy, which entails the construction of an oil refinery to process crude oil from West Asia before selling it to East Asian countries, was announced in 2007 by the then Barisan Nasional (BN) state government.

PAS, which took over the state administration after the 12th General Election in 2008, agreed to continue the project.

It was, however, delayed because the appointed developer faced financial and technical problems.

Under the BN government's initial planning, the Zipy project was expected to be completed this year and generate RM400 million in revenue a year to the state government.

"These developments will help boost property demand. We are fine-tuning details on our 8ha project and hope to start construction in the second half of next year. We believe the project will help change the landscape of Sungai Petani," Yap said.

One of the earliest developers in Kedah was Asiatic Land Development Sdn Bhd, a unit of Asiatic Development Bhd that is 54.8 per cent owned by Genting Bhd.

In 1994, the company launched the 284ha Asiatic Permaipura project, which comprised of commercial centres, an 18-hole golf club and the Permaipura Golf & Country Club, bungalow land, residential houses and shop offices.

"We will look for more opportunities to develop landbank in Kedah and other states. The focus will be in Peninsular Malaysia. We are not ready yet to move to Sabah and Sarawak," Yap said.

NCT has two ongoing projects worth a combined RM2 billion. They are Ion d'Elemen in Genting Highlands and Salak Perdana near Sepang.

NCT aims to double revenue

By Sharen Kaur

Published in NST on Jan 18, 2014

DRIVING EARNINGS: Group to expand property development segment, planning for Bursa listing 

NCT GROUP is scaling up its property development segment to drive earnings in a bid to list on Bursa Malaysia within three years.

The construction and property developer aims to register RM400 million in revenue this year, almost a twofold jump from the RM250 million achieved last year.

In terms of net profit contribution, it expects 60 per cent to come from property development and the rest from construction, according to its founder and group managing director Yap Ngan Choy.

The company currently has RM1 billion worth of construction contracts at hand, of which half are works on property development projects by SP Setia Bhd, Putrajaya Holdings Sdn Bhd and the Urban Wellbeing, Housing and Local Government Ministry.

The plan is to maintain the RM1 billion level annually or increase it gradually when necessary, Yap told Business Times.

On property development, NCT has two projects worth a combined RM2 billion.

They are Ion d'Elemen in Genting Highlands and Salak Perdana, which is located between Putrajaya and the Kuala Lumpur International Airport in Sepang.

Yap said the bulk of the group's earnings has come from the construction segment but as margins are shrinking, NCT has decided to expand its activities in property development.

"We can still expect margins of between 25 and 30 per cent for property development, which is why we want to expand in this area.

Margins for construction are shrinking because of higher prices of building materials and labour shortage. It is not feasible to focus on construction alone now," he said in an interview recently.

NCT was formed in 1985 as a tiling specialist. It moved to construction in 1999 to take advantage of the booming industry. The group later ventured into property development in 2006 to diversify its earnings.

Can SP Setia really afford to lose Liew?

By Sharen Kaur
sharen@mediaprima.com.my
Published in NST on January 22, 2014

NO man is an island but Tan Sri Liew Kee Sin quitting as SP Setia Bhd boss has implications beyond the management changes that will take place in the country's top property developer, post April 30.

The Battersea Power Station project in London will miss Liew much more than SP Setia, and at stake is the reputation of Malaysia's top builder in London.

The knee-jerk reaction has been to look at how SP Setia will cope without Liew.

With the excitement over his resignation, most people have forgotten that the Battersea project is Liew's brainchild. He has been spearheading the project, located by the River Thames, from Day One.

To recap, a Malaysian consortium comprising SP Setia, Sime Darby Property Bhd and the Employees Provident Fund won the bid to redevelop the Battersea power station, which had sat idle for 30 years.

The project, currently the biggest development in the United Kingdom and perhaps also in Europe, has shown that Malaysians can be world champs.

It is expected to generate more than RM40 billion in gross development value over 12 to 15 years.

Phase 1 of the project, launched in January 2013, has since seen a 99 per cent take-up rate for the 866 residential units named Circus West.

Besides the Battersea project, Liew brought SP Setia to Melbourne, where it is developing Parque, which comprises 323 apartments worth RM800 million.

Obviously, the man has international contacts to help in the design of properties, acquire choice land and pinpoint growth areas abroad.

These are the tools that Liew will bring on board to Eco World Development Group Bhd (formerly Focal Aims Holdings Bhd), which has a few billion ringgit worth of projects in hand.

And these are the very same things SP Setia will miss when Liew clocks off.

The Johor-based Eco World is linked to Liew through his son, Tian Xiong, who is a director of the company.

The most defining thing about Liew is the loyalty he commands from the people who work with him. The true quality of a leader is not in the leadership but in how he is perceived by the people who work with him.

At SP Setia, the question is not who will replace Liew but who will bring in 250 "foot soldiers" to replace the 250 who will quit SP Setia to mostly join Eco World.

Those 250 are the nuts and bolts of the once formidable SP Setia juggernaut.

Japanese firms eye Malaysia's key projects

By Sharen Kaur
Published in NST on January 4, 2014

JAPANESE firms have expressed interest in helping to develop some of Malaysia's key infrastructure projects, including the high-speed rail (HSR) link.

Japanese Chamber of Trade and Industry Malaysia (Jactim) president Shuichi Yoshida said Japan is keen to participate in the HSR development.

"We would like to bring in our expertise and transfer our technical know-how in the development process," Yoshida said here, recently.

Japan was the first country to build dedicated railway lines for high-speed travel. It introduced bullet trains, or Shinkansen, to the world in 1964.
 

 It is currently building the Tokyo-Osaka line at a cost of US$111.4 billion (RM366.51 billion) using the magnetic levitation, or maglev, technology.

Malaysia plans to build the HSR link between Kuala Lumpur and Singapore, which is expected to cut land travelling time between the two countries to just 90 minutes.

The project, which was agreed to in principle between Malaysia and Singapore in February last year, is targeted for completion by 2020.

Business Times has reported that the 400km project is estimated to cost some RM40 billion. The amount includes the purchase of locomotives and high-speed bullet trains.

The Chinese, Arabs and Europeans are also eyeing a share in the HSR development.

Several Malaysian and foreign firms have started talks to form consortiums to bid for the project.

They include MMC Corp Bhd, which may team up with Gamuda Bhd and Chinese and European system integrators; and YTL Corp Bhd, which partners Spanish bullet-train maker Talgo or CAF.

Other firms are UEM Group Bhd, which is working with Ara Group to form a consortium with European companies that may also include Talgo and Global Rail Sdn Bhd, which is talking to Canada's Bombardier Inc and Chinese firm China Railway Group.

Meanwhile, Yoshida said Japanese companies are also interested to build water-treatment plants and power-plant projects that are being implemented under the Economic Transformation Programme.

Railway union to stage protest next month

By Sharen Kaur
Published in NST on Jan 4, 2014

THE Railwaymen Union of Malaya (RUM) will stage a protest next month to put pressure on the president of financially-ailing Keretapi Tanah Melayu Bhd (KTMB), Datuk Elias Kadir, to resign.

RUM president Abdul Razak Md Hassan said the union's 3,500 members are hoping that the government will replace Elias and put the company on the road to recovery.

In an interview with Business Times, Abdul Razak said losses under Elias' stewardship has worsened to over RM200 million, compared to previous years'.

He said the perception among investors and the public that KTMB is only a service provider and non-profit orientated is also making matters worse for the company.

"This is really not good as KTMB is a national railway company. In the last 18 months, more than 15 key people have resigned as the company has no direction. All efforts by Elias to turn around KTMB have only made it worse.

"Last year, KTMB had several weaknesses with insufficient locomotives, overdue payments to suppliers, faulty tracks leading to accidents, and hiring expensive consultants that brought no benefits to KTMB.

"We hope that the Ministry of Finance Inc will give us support and pump some money into KTMB to help it move forward and turn around," he said.

Elias did not immediately respond to Business Times' queries.

KTMB, which is involved in freight, intercity and commuter train services, employs 5,600 people.

It has been bleeding red ink since it was corporatised in August 1992. It did make a net profit of RM9 million to RM15 million from 1993 to 1995.

Elias was appointed KTMB president in May 2012 to help turn it into a profitable entity.

He had told Business Times previously that he was targeting to grow non-rail revenues, slash costs and improve efficiency and train delivery.

But in fiscal year 2012, KTMB recorded a net loss of RM284 million on revenue of RM361 million.

Abdul Razak estimated losses for 2013 to be around RM220 million.

He said KTMB will either need to be re-engineered or allow private parties to utilise its railway line for a fee.

Meanwhile, revenue for KTMB is set to improve this year with the increase in cargo fares effective January 1.

"We estimate it would give KTMB an additional revenue of RM100 million a year. We hope the fares for intercity and commuter services will also be raised. We are subsidising RM1 for every passenger and this is putting pressure on our margin," he said.

Gamuda joining MMC in KTMB bid?

By Sharen Kaur
Published in NST on Jan 2, 2014

RM5b DEAL: Company awaiting response for a partnership to privatise railway operations, sources say GAMUDA Bhd may submit a proposal to Malaysian Mining Corp (MMC) Bhd to jointly take over Keretapi Tanah Melayu Bhd’s (KTMB) operations in a deal worth more than RM5 billion.

Sources familiar with the matter said Gamuda and MMC, a company controlled by Albukhary Foundation, are in discussions over
the matter.

“An agreement to jointly privatise KTMB is in the works. Gamuda is awaiting MMC’s response for a partnership to take over and privatise KTMB. The deal would require investments of more than RM5 billion,” the sources said.


Gamuda and MMC are already involved in a joint venture to carry out the double-tracking railway project from Ipoh to Padang Besar on a design-and-build basis, which is now nearing
completion.

Business Times had reported in late 2011 that MMC was planning a takeover of the ailing KTMB.

The proposed takeover would give MMC substantial control over the nation’s railway and logistics operations.

The conglomerate owns the Senai Airport and major local ports, including the Port of Tanjung Pelepas and Pasir Gudang Port.

KTMB has assets and land worth an estimated RM50 billion. It is the operator of the national railway line, while the assets and land are owned by Railway Assets Corp (RAC).

Although the assets are parked under RAC, KTMB has a big influence on how the assets are utilised.

KTMB, which is involved in freight, intercity and commuter train services, among others, has been bleeding red since its corporatisation in August 1992.

It did make a net profit of RM9 million to RM15 million from 1993 to 1995, but later sank into the red.

The government is open to proposals on the privatisation of KTMB.

MMC received a due diligence letter from the Transport Ministry about two years ago and a feasibility study was carried out.

It is understood that MMC had submitted a proposal to the Minister of Finance Inc. However, it did not fulfil all the requirements and criteria for a takeover.

“MMC did not outline how it intended to turn around KTMB. They only talked about property development on KTMB’s owned land.

There has been no further development,” the source said.

The takeover by MMC was expected to be funded by government-backed bonds.

Deputy Transport Minister Abdul Aziz Kaprawi had said there are no plans to privatise KTMB.