Getting swallowed by bigger government-linked companies (GLCs) really didn’t spell the end for some of Malaysia’s top property entreprenuers

Updated: Saturday May 31, 2014 MYT 7:49:13 AM

Resilient chieftains

BY ANGIE NG

GETTING swallowed by bigger government-linked companies (GLCs) really didn’t spell the end for some of the country’s top property entreprenuers. The stalwarts of the acquired companies are still around strutting their stuffs and living their dreams of building landmark projects.

The famous trio that come to mind are Datuk Tong Kooi Ong of the Sunrise Bhdfame, Datuk Terry Tham and Tan Sri Liew Kee Sin who are synonymous with Eastern & Oriental Bhd (E&O) and SP Setia Bhd respectively.

Since the early 2011 merger between UEM Land Holdings Bhd and Sunrise Bhd, Tong, the former executive chairman of Sunrise, has reemerged with his own property ventures.

His outfit, Rainbow Crest Sdn Bhd, has tied up with Johor-based Daiman Development Bhd in a 50:50 joint venture to develop a RM1.4bil integrated development in Plentong, Johor. Tong also sits on the board of UEM Sunrise and chairs the development committee within the enlarged group. He still oversees the company’s project in Vancouver, Canada.

E&O’s Datuk Terry Tham has also made known that he is here to stay and will be involved in the company for the long haul.

Tham will be raising his stake in E&O from the current 5.1% to 15%.

On Wednesday, the 61-year-old Tham entered into an agreement to acquire 110 million shares at RM2.90 a share from Sime Darby in a deal that will cost him RM319mil. This will raise Tham’s stake in E&O by a further 9.9% to 15%.

Sime Darby’s proposed disposal of its stake in E&O to Tham shows that the stalwart of E&O is still much valued for his contribution. This is especially so now that E&O is entering into a critical stage in its Seri Tanjung Pinang project in Penang. The company is in the final stages of getting the necessary approvals for the Seri Tanjung Pinang phase two project.

The Seri Tanjung Pinang project is E&O’s jewel flagship project that will drive the company’s earnings streams for many years to come.

E&O hopes to obtain the Penang state government’s endorsement of the phase two project masterplan by the fourth quarter of this year. Reclamation work is to take three to five years and the development of STP phase two will take up to 15 years.

Another GLC-linked deal involved Permodalan Nasional Bhd’s (PNB) takeover of SP Setia which also took place in 2011.

The man behind the success of SP Setia is Tan Sri Liew Kee Sin, a former investment banker who engineered the reverse takeover of SP Setia in 1996, then a construction outfit and steered it into one of the most profitable property concerns. PNB had wanted to leverage on the strong SP Setia brandname to make inroads in both the local and international property market.

Tan Sri Liew Kee Sin, who was previously the president and chief executive officer of SP Setia, had late last month left SP Setia and has emerged as a substantial shareholder of Eco World with a 35.05% indirect stake or 88.78 million shares in the company. He is a non-independent and non-executive director of Eco World.

Liew however remains as the chairman of the Battersea Power Station project until September 2015, as well as the managing director for Qinzhou Development (M) Consortium Sdn Bhd, a Sino-foreign joint-venture company to develop the China-Malaysia Qinzhou Industrial Park.

CB Richard Ellis Malaysia executive director Paul Khong says the spate of mergers and acquisitions (M&As) that involved GLCs buying into private sector property companies shows the human touch and leadership element is still the differentiating factor between developers that stand out as highly successful and those that are not.

“Leaders who are visionary and have the foresight to decide on the right landbanking strategies on where to buy land for development, couple with having the skills for good project planning and execution, are among the important attributes that contribute to the degree of success among developers,” Khong says.

Chieftains of property companies who stand out are also well known for their “can do” spirit and their “out of the box” ideas, and the ability to inspire their charges to come out with exemplary project ideas that will create the “wow” effect that intrigues the market. In a nutshell, they are passionate about what they do and are able to translate their ideas into brick and mortar. The main factor is the strong leadership cum management in those companies.

“Most importantly they should keep their ears to the ground and never loose touch with the market,” Khong advices.

The midas touch

Increasingly, having the right financial muscle is also an important attribute to ensure that companies have the ability to undertake bigger sized and more capital-intensive projects. The financial strength of the GLCs and their large landbank make their M&A propositions to their smaller peers tenable and attractive, and that also contributed to the materialisation of these merger deals.

Even though the companies may have different strengths and product offerings, these deals have one thing in common: the courted companies have strong brandnames and are steered by their founding CEOs who are savvy businessmen and dealmakers.

UEM Land Holdings Bhd’s RM1.39bil purchase of Sunrise Bhd in early 2011 got the ball rolling and the other two deals involved Sime Darby Bhd’s acquisition of a 30% stake in Eastern & Oriental Bhd for RM766mil and Permodalan Nasional Bhd’s takeover of SP Setia Bhd.

Being the first such deal back in 2010, the UEM-Sunrise merger was unprecedented between a GLC and a private sector developer and it came as a big surprise to the market.

The main reasons Sunrise’s single largest shareholder and executive chairman then, Datuk Tong Kooi Ong agreed to UEM Land’s proposition for a merger was the landbank constraint of Sunrise and the potential for the enlarged entity to reap synergistic benefits from the large landbank of UEM Land. UEM Land can then ride on the development expertise and strong branding of Sunrise in the luxury high-rise residential and niche commercial property projects.

UEM Land has significant township landbank that allowed for great product flexibility, while Sunrise’s marketing proficiency and financial planning capability could easily be transplanted to UEM Land. Sunrise’s strength from its ability to take advantage of opportunities and its strong business acumen had been harnessed for the benefit of the enlarged UEM Sunrise group.

Tong’s calculated risk to ride on the tipping point of UEM Land when there were some major developments in UEM Land then was to ensure Sunrise would be able to diversify from its flagship Mont’ Kiara where competition was intensifying and to gain maiden entry into Iskandar Malaysia in line with Sunrise’s growth strategy of having multiple products in multiple locations. Given that UEM Land owned more than 9,000 acres in greenfield Nusajaya, this also helped to solve Sunrise’s small landbank disadvantage.

Tong’s astute skills as a developer is still highly valued and his advice sought after by UEM Sunrise.

Sime Darby’s purchase of a 30% stake in E&O in 2011 was also a case of synergistic benefits and a logical step to strengthen the companies’ market positions. While the plantation-based conglomerate’s strength is its large landbank, E&O can be counted on its technical skills and strong brandname in the upscale luxury residential segment. The deal has opened up wider opportunities for both to leverage on each other’s strength.

Tham, who founded the E&O group, had initially agreed to be around for at least three years to helm E&O as its managing director which meant he has the flexibility to call it a day once the three year period is up this August.

But as proof that he is in for the long haul and remains committed to steering the property outfit forward, Tham will be raising his stake in E&O from the current 5.1% to 15%.

As for Tan Sri Liew Kee Sin, his midas touch in bringing out the finesse in development projects will continue to be felt with the aggressive growth plans in place for Eco World.

The company has just unveiled RM20.8bil projects comprising three townships and a business park in the Klang Valley and Iskandar Malaysia.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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