Sunday 29 September 2013

Investments in Samalaju

Samalaju Industrial Park, located 62km from the industrial town of Bintulu, 180km from Bakun Dam

Samalaju Industrial Park 8,000ha

Tokuyama Corp (Japanese)
Polycrystalline silicon plant
Total 200 ha
Phase 1 – RM3b – 40 ha – capacity 6,200 tonnes per year – total staff strength 500 - Construction began in Feb 2011, fully operational November 2013
Phase 2 – 30 ha - RM5b – capacity 13,800 tonnes per year – total staff strength 550 - expected to complete by mid 2014, commissioned a year later
Total 5 phases
Press Metal Bintulu Sdn Bhd (Malaysian)
Aluminium ingots and billets
Pertama Ferroalloys Sdn Bhd
Manganese ferroalloy smelting plant
OM Materials (Sarawak) Sdn Bhd
RM1.53b silicon manganese smelting plant
Phase 1 USD592m ferro alloy smelter plant (308,000tonne per annum ferrosilicon alloys) 
Asia Advanced Materials (South Korean)
Metalic silica – scheduled to commence operations in 4Q2013
Asia Minerals Ltd (Hong Kong)
Silicon manganese
Sakura Ferroalloys Sdn Bhd (JV between Assmang Ltd, Sumitomo Corporation and China Steel)
80MW manganese smelter. Annual production of 100,000 tonnes of high-carbon ferro-manganese and 60,000 tonnes of silicon manganese. Investment RM1b. Expected to come online in 2015.

SEB has committed some 2,100MW via long-term power purchase agreements (PPAs) with energy-intensive industries in Samalaju Industrial Park, Bintulu. The latest PPA signed last month was with Malaysian Phosphate Addictives (Sarawak) Sdn Bhd for the supply of 150MW to its RM1.04bil phosphorous plant project. (Star)

Saturday 28 September 2013

KLIA-klia2 Railway Line

Key info:

Length: 2.2km

Cost: about RM100m

Work on the extension started in July 2011

The railway line extension will increase ridership by 40% to 7.4m passengers when klia2 opens

YTL is talking to Spanish and Chinese train manufacturers to buy up to 4 train sets, comprising 4 coaches each, for RM150m to serve klia2

The existing railway line from KL Sentral to KLIA is served by 12 electric high-seed trains.

The trains were acquired from German-based Siemens AG

Express Rail Link Sdn Bhd has a 30 year concession to operate the KLIA Express and KLIA Transit trains between KL Sentral and KLIA

Friday 27 September 2013

Weida aims to double revenue in five years

WEIDA (M) BHD [] managing director Datuk Lee Choon Chin foresees that the company’s revenue from polyethylene-based building materials will double to RM400 million in five years’ time.

“We are hoping to double or even triple our manufacturing revenue from Peninsular Malaysia in the next five years,” Lee tells The Edge.

To achieve that, Weida has allocated RM100 million in capital expenditure (capex) to boost its capacity from 20,000 tonnes per annum to 50,000 tonnes per annum. Its existing plants are currently running at between 70% to 80% capacity.

The Sarawak-based company is planning to make inroads into Peninsular Malaysia. It has a two-pronged plan to expand its presence there — through its manufacturing segment and a diversification into property development.

Of Weida’s Peninsular Malaysia revenue, 65% can be attributed to the manufacturing segment while the rest is from the environmental engineering services segment.

A portion of Weida’s planned capex will be used to set up a new plant in the peninsula, although Weida has yet to decide where to build this factory. It has an existing plant in Nilai, Negeri Sembilan.

“At the moment, most of our manufacturing sales are coming from the Klang Valley, but we see potential for growth in the southern region of Peninsular Malaysia. Going forward, we may look into a second and third plant to cater for the expansion plan as well as to establish our desired market positioning and share,” Lee says.

Currently, Weida derives 78% of its revenue from Sabah and Sarawak. For FY2013 ended March 31, it reported a net profit of RM50.77 million, up from RM39.34 million the year before. This was on the back of RM383.18 million in revenue, an increase from RM309.68million in 2012.

Weida’s manufacturing division largely caters for the water treatment sector, in which it produces more than 200 types of polyethylenebased building materials. These include septic tanks, rainwater harvesting equipment, water piping, treatment plants and biogas plants.

Weida takes pride in the fact that all its equipment are designed in-house and patented, says Lee.

But the engineering of these products overlaps with the environmental engineering services segment, which also includes the provision of services and projects.

Venturing into property development Weida is diversifying into the property development segment with its first project, the Urbana Residences@Ara Damansara in the Klang Valley.

The company plans to position itself as a boutique developer and intends to launch Urbana in 4Q2013, marking its 30th anniversary.

According to Lee, Urbana will be a serviced apartment project with an estimated gross development value (GDV) of RM230 million. It will be linked to 7 major highways: New Pantai Expressway, New Klang Valley Expressway, North-South Expressway Central Link, Federal Highway, Damansara-Puchong Highway, Sprint and Kesas Highway.

Weida also plans to launch a similar development in Mont Kiara next year with an estimated GDV of RM330 million.

“Construction cost will be about 35% of GDV — more if land cost is included. At the end of the day, we will be earning about 20% to 22% in terms of profits,” says Lee.

The company has, over the years, built a steady recurring income source from the provision and maintenance of water systems as well as the lease of telecommunications towers. The operation comes under its environmental engineering services division.

Weida’s recurring income streams accounted for about 50% of its revenue in FY2013.

With the diversification into property development, Weida’s earnings portfolio is expected to change in the next five years. The environmental engineering services division’s contribution to the group’s earnings is expected to decrease to about 20% to 30% while the property development segment is forecast to contribute about 30% to 40%.

Meanwhile, the manufacturing segment, which presently accounts for about 50% of group’s revenue, is expected to decrease to between 30% and 40%.

A balanced business model
Weida has its roots in the water segment where it began with a strong vision to uplift the living standards of the community in Sabah and Sarawak.

“For over 30 years, we have steered the same course,” Lee says, adding that even though the group has diversified into telecommunications and now PROPERTIES [], it retains the same values.

He says Weida has been profitable for all of its 30 years in business.

“Our business model is such that in terms of income, it is always balanced. We are not overly dependent on any one particular business or sector.

“Because of our business diversification, we cut across different industries. It is the same with our
customer base, which is a good mix of government and private customers.”

Lee stresses the importance of a resilient and robust business model. “The material portion of
our profits and free cash flows is derived from fixed and recurring income.”

In this context, Weida relies on long-term contracts in the telecoms and water treatment sectors.

“We have long-term contracts leasing out the group’s own telecoms towers to prominent operators,” Lee says. “These include DiGi, Maxis and Celcom.”

The estimated net rental income [for this division] in the next five years will be about RM70 million,
he says.

To date, Weida has built 362 telecoms towers, with two-thirds of them under long-term
maintenance contracts.

In the water sector, Weida receives fixed income from long-term contracts for the management,
operations and maintenance of three septic sludge treatment plants in Kuching, Sibu and Miri.

The concession period for each of these three contracts is 25 years. The Kuching plant is already in its tenth year while the Sibu and Miri plants are only about one to two years old.

“The estimated concession income in the next five years will be about RM60 million,” says Lee.


Founded in 1983, Weida was listed on the Main Market of Bursa Malaysia since 2001. Unbroken profit record since listing

4 core businesses
i) manufacturing of polyethylene-based building materials
ii) Environmental engineering services
iii) construction of telecommunication infrastructure, environment and building works
iv) property development

Manufacturing of polyethylene-based building materials
Weida remained the market leader in Malaysia, with a dominant position in East Malaysia.
5 manufacturing plants i Malaysia located in Nilai, Kuching, Kota Kinabalu, Miri and Tawau, plus 1 in Manila

120,000 m2 of manufacturing facilities

High barrier of entry. Substantial capital investment, intensive research and development programmes and specialist technological expertise developed in-house over the years

Advantage of polyethylene - corrosion resistant, durable, leakage-proof, lightweight, hygienic and weather resistant

Environmental Engineering Services
Currently engaged in the management, operations and maintenance of 3 septic sludge treatment plants, one each in Kuching, Sibu and Miri.

Property Development

Urbana Residences at Ara Damansara
356 units of service apartment
Leasehold land
GDV RM231m
GDC RM185m (JV entitlement RM35m, land related cost nil, construction and development expenditure RM131m, tax and financing cost RM19m)
land area 9966m2
Expected to commence in 4Q13 and complete in 2016
Land cost 15% of GDV or minimum RM30m

Mont' Kiara
GDV RM330m
GDC RM264m (JV entitlement RM50m, land related cost RM10m, construction and development expenditure RM175m, tax and financing cost RM29m)
15% GDV or minimum RM32m

Effective from 1 April 2012, the financial statements of the Weida Group have been prepared in accordance with IFRIC whereby revenue from sale of properties can only be recognised when ownership of the properties sold are transferred to purchasers upon issuance of the completion certificates or occupation permits.

Material portion of its profits and free cash flows comes from fixed and recurring income arising from long term contracts - fixed rental income arising from telecommunication towers built by the group and licensed to telecommunication companies on a long term basis; and fixed income arising from the management, operations and maintenance of 3 septic sludge treatment plants on a long term contracts and extending coverage to 3 more councils with a total population of 300,000

Treasury shares: 4.829%

Monday 23 September 2013

Key retail properties' value and yield

At the moment, the average rent for Tier-1 or super regional malls range from RM11 to RM21 psf per montyh. Other malls range from RM6.50 to RM7.50psf per month for Tier-2

Established and popular shopping centres should be able to generate a yield of 7% to 9% while shopping centres located in secondary locations in Malaysia should have a yield of 5% to 7%.

Thursday 19 September 2013

Adjustments to exercise price and number of outstanding warrants

It is not so common to see issuance of free warrants arising from issuance of rights shares merging with existing warrants. Asia Media did that recently and below is the calculation to arrive at new exercise price and number of adjustment warrants

Corporate Exercise
1 for 1 rights share at RM0.11/share
1 free new warrant for every 4 rights shares subscribed

Tuesday 17 September 2013

Valuation of land using residual method

In Ibraco's circular to shareholders dated 17 September 2013 in relation to a property development in Bintulu, the valuation certificate on the development lands provided an example of land valuation adopting residual method. The formulas are as follows:

Residual land value when the proposed development is completed =
Gross Realisation (Development) Value (GRV/GDV) -
Total Development Cost (including finance cost) –
Developer’s profit

Current residual land value or market value =
Residual land value when the proposed development is completed x
present value factor over development period

See Ibraco's circular to shareholders dated 17 September 2013

Thursday 12 September 2013

Point, a common unit of measurement in Sarawak for land area

In Sarawak, "point" is a commonly used as unit of measurement for land area, as compared to square feet used in West Malaysia.

1 acre = 100 points

Wednesday 11 September 2013

Wellcall expands to meet American demand

The soon-to-be-finalised expansion plans for Wellcall Holdings Bhd - Malaysia's largest industrial rubber hose exporter - driven by demand from new clients in the Americas, will increase its production capacity by 70%

The expansion is to cater for clients that need bulk orders, which might incur high logistic costs. 70% of the additional capacity is for new clients from North and South America and the rest is for existing customers.

Wellcall's products are targeted at the mining, oil and gas, transport, food and beverage and shipping sectors.

"We have already penetrated the Americas, but after a 3-week marketing trip to the US, we realised that we had to approach the market differently. We had to do mass orders to meet its needs"

In FY12 ended Sept 30, the US accounted for RM30.2mof total sales or 15.63%, almost double FY11's RM18.4m

South America contributed RM16.9m to sales last year, up 19.64% from the previous year.

Wellcall is now awaiting approval from relevant state agencies to acquire 8.63acres of 99-year leasehold land in Ipoh, Perak, which should be given in the coming months.

Half an acre of the land was reclaimed from a lake, which is for future contigencies.

Wellcall's new factory is expected to be set up by mid-2014 and will be built in 2 stages. Once the stages are completed, the factory will increase the company's production capacity by 60% - 70%

"We will build the basic infrastructure for starters. Then, once stage 1 is completed, it will increase our capacity by at least 40% to 46000 tonnes from 33000 tonnes now. Once we secure more contracts, we will proceed with stage 2, which will add another 20% to 30% or 10,000 tonnes to capacity, but only after stage 1 reaches maximum capacity. We only expand every 4 to 5 years"

The new facility will house sophisticated and high-tech machinery that will focus solely on rubber hoses made using mandrels.

Hose mandrels are long, high specification rods around which reinforced industrial rubber hoses are formed. Mandrels are used in producing hoses that are more than 2 inches but less than 2ft in diameter and with a maximum length of 60m.

Natural rubber makes up 70% of Wellcall's production cost. Price of standard Malaysian rubber have fallen 52% from their peakin 2011 to RM8.10 per kg now.

Demand for mandrel hoses remains intact, growing at 4% to 5% per annum, especially from markets like Europe and the US.

In Asia Pacific, not many have this type of technology or expertise, which gives Wellcall a competitive edge as its products are in a niche market. Moreover, the company does not stock its products as its clients have specific needs and specifications for the hoses they buy.

The global market for tubing and rubber hoses in 2004 was worth about US$4.4b, of which Wellcall had a 0.8% share.

Moving forward, the company intends to sell its unique blend of compounding material to its existing clients, which will be another source of income for it. More clients in Asia-Pacific are turning to Wellcall for compounding material as China is no longer a reliable source for it in terms of quality.

Wellcall exports 93% of its products to 65 countries with Malaysia accounting for only 8% of total sales.

Tuesday 10 September 2013

Joint Property Development Projects by Prasarana

Taman Tun Dr Ismail
Naza TTDI Sdn Bhd
Dang Wangi LRT Station
Crest Builder International Sdn Bhd – Detik Utuh Sdn Bhd JV
Station 2 of LRT extension project in Ara Damansara
ADS Projek Sdn Bhd
Brickfield – next to Tun Sambanthan monorail station
Bina Puri Construction Sdn Bhd
Station 6 of LRT extension project in Puchong
IOI Properties Bhd
Station 1 of LRT extension project in Awan Besar, Bukit Jalil
SM Land Sdn Bhd

Wednesday 4 September 2013

I-Bhd JV mall to generate RM60mil in pre-tax profit

PETALING JAYA: The CentralPlaza@i-City mall, a 60:40 project between Thailand’s leading retail property developer Central Pattana Pcl (CPN) and I-Bhd, is expected to generate RM60mil in pre-tax profit per year during the first lease term, according to I-Bhd deputy chairman Datuk Eu Hong Chew.

He said that by then I-Bhd’s group profits (before the mall contribution) was expected to be in the region of RM200mil per year resulting from growth in property development as well as leisure business.

Eu told StarBiz that CPN was the third foreign party that the Malaysian developer has ventured jointly with, alongside Australia’s ServCorp and Al Rahji Banking group.

“We work with these parties for their specific knowledge that we want to tap into. For CPN, we are eyeing their expertise in mall development and operations,” he said.

The CentralPlaza@i-City project in Shah Alam, is CPN’s first overseas mall in Malaysia and marks its first step into the Asean market.

The construction of the project, which will have a gross floor area of 138,000 sq m and net leasable area of 89,700 sq m, is expected to start next year and be completed in 2016.

Meanwhile, Wallaya Chirathivat, CPN senior executive vice president for business development and construction, was quoted in a press statement, as saying that CPN saw opportunities in overseas markets, particularly in Asean countries.

“As a single market, the aggregated Asean market will have high economic circulation and purchasing power, which are positive factors for the retail industry. CPN is interested in countries where there is high city growth, a large population, and expanding groups of middle and high-income consumers.

“We are focusing on promoting organisational growth with aggressive strategies. Over the next five years, we expect to open more shopping malls in Asean countries, each under a budget of at least 4-5 billion baht,” she said.

She said CPN believed the Malaysian retail market has plenty of room for growth.

“The country’s overall economy is growing and there is expanding investment, particularly in the retail industry. Furthermore, there is high urbanisation growth and strong industrial growth. The GDP and per capita income are also rapidly rising, said Chirathivat.