Developer is also linked to management changes and RM1bil infrastructure deal

PETALING JAYA: Malaysian Resources Corp Bhd (MRCB) is being linked with a major property takeover deal, management changes and a RM1bil infrastructure deal although the company itself is tight-lipped about its recent news flow.

MRCB is controlled by the Employees Provident Fund (EPF), which has a 42.2% stake in the property and infrastructure developer.

A business daily recently reported that MRCB was expected to land a RM1bil contract soon concerning the Klang Valley My Rapid Transit (MRT) project.

This would substantially boost its order book, after the company won a RM1.33bil contract in August 2011 for the light rail transit extension of the Ampang line.

With its prime land bank running low, especially as its KL Sentral project is reaching maturity stage, MRCB is expected to ‘marry’ a partner with sufficient prime land bank.

Meanwhile, industry observers are also excited over a recent report by a financial weekly that MRCB was planning to take over private property developer Nusa Gapurna Development Sdn Bhd, which is 40% owned by EPF.

The remaining 60% stake in Nusa Gapurna is held by businessman Datuk Mohamad Salim Fateh Din.

The report said such a deal would mean MRCB would acquire Nusa Gapurna's development projects in the Klang Valley that were said to have a combined gross development value (GDV) of up to RM13bil.

Nusa Gapurna is also said to have 60 acres of prime commercial land in Petaling Jaya, Old Klang Road and Subang Jaya.

This includes a 40-acre plot located behind Hilton Petaling Jaya Hotel, which is planned for a development similar to MRCB's Kuala Lumpur Sentral.

The deal would reportedly be financed via an exchange of shares, which might result in Mohamad Salim getting a 20% stake in MRCB.

According to industry observers, Mohamad Salim is also the frontrunner to be the next chief executive of MRCB, following the resignation of the company's CEO Datuk Mohamed Razeek Hussain on July 24.

Razeek's tenure with MRCB will end on Aug 17, following which he would reportedly become the head of DRB-Hicom Bhd's property division.

In a report, CIMB Research said a MRCB-Nusa Gapurna takeover deal would help to streamline EPF's property assets. It said this would be positive for MRCB as it would benefit from the injection of land bank and new property earnings stream.

Based on indicative land values of RM150 to RM350 per sq ft for Nusa Gapurna's key land banks, the deal could be worth RM751mil by the research unit's estimates.

“This would raise the revised net asset value/target price by 3%, assuming half of the deal value is funded by MRCB shares.

“We do not think it will be fully funded by the issuance of new shares, as management has plans to raise up to RM700mil in medium-term notes for land banking,” said CIMB Research.

CIMB Research pointed out that Nusa Gapurna had been around in the local property scene for 17 years, with projects including the development of properties for KFC Holdings (M) Bhd and Giant hypermarkets.

Nusa Gapurna also collaborated with MRCB on developing the 348 Sentral project in 2009.

Industry observers contacted by StarBiz said a MRCB-Nusa Gapurna takeover deal and appointing Mohamad Salim as MRCB chief executive was a logical move.

“Besides an injection of entrepreneurship spirit, what MRCB would want is a tough and strong leader who is able to negotiate well with the Government regarding projects. Remember, MRCB has to fight with other GLCs (government-linked companies) for the same projects,” said an observer.

Another observer said there were political considerations as well and he claimed that Nusa Gapurna was known to be close to the previous Barisan-led Selangor state government.

One research analyst opined that such a deal was in preparation for EPF's plans to call for tenders for the re-development of some parcels of the 3,000 acres of Rubber Research Institute (RRI) land in Sungai Buloh.

“With Nusa Gapurna and Mohamad Salim in the picture, MRCB would be better positioned to maximise the development potential of the RRI land,” said the analyst.

In response to a StarBiz query, MRCB said it did not have an announcement yet on the CEO replacement. “No comment from the company (MRCB) at this point.”

The EPF also declined to comment on who would be helming MRCB.

EPF public relations general manager Nik Affendi Jaafar said it was not the retirement fund's policy to comment on its investee companies as they had their own board of directors and management.

MIDF Research said in a report that it was expecting MRCB to be the prime developer of the RM10bil re-development of the RRI land.

“MRCB is also reportedly the frontrunner to develop a prime 20-acre land at Jalan Bangsar in Kuala Lumpur,” said MIDF Research.

Meanwhile, UOB Kay Hian Malaysia Research reiterated its view that MRCB's prime land bank is running low (KL Sentral is at maturity stage).

“If so, we believe MRCB will marry' a partner with sufficient prime land bank (preferably in the Klang Valley), good track record and most importantly, the partner should have good working relationship with EPF.”

UOB Kay Hian said MRCB's share price catalysts included a potential to co-develop a 24-acre site in Penang Sentral (finalising approval in the second half of 2011), and future property development projects and land acquisitions in the Klang Valley, Johor Baru and Penang.

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