This article first appeared in The Edge Malaysia Weekly on January 22, 2018 - January 28, 2018

PROPERTY development outfit Encorp Bhd, whose largest shareholder is the Federal Land Development Authority (FELDA), is a counter to watch, say market watchers.

FELDA holds 72.27% equity interest in the company via Felda Investment Corp Sdn Bhd.

The land authority appointed Datuk Syed Mohamed Syed Ibrahim as Encorp’s non-independent and non-executive chairman last August to unlock the company’s value — just like it brought Datuk Azhar Abdul Hamid into 33%-owned Felda Global Ventures Holdings Bhd (FGV) in September last year to clean it up.

Syed Mohamed took over from Tan Sri Mohd Isa Abdul Samad, the former FELDA chairman who was replaced by Tan Sri Shahrir Samad in January last year. He is tasked with working closely with Encorp CEO Datuk Zakaria Nordin to get the company out of a rut.

“Syed Mohamed has to turn things around at Encorp, just as how Azhar was given the mandate to clean house at FGV,” says a source.

FELDA also has stakes in IRIS Corp Bhd (19.39%) and Barakah Offshore Petroleum Bhd (8.91%) but these companies are likely to be driven by Datuk Paul Poh Yang Hong and Datuk Rozabil @ Rozamujib Abdul Rahman, who collectively hold 9.7% of IRIS, and the Samling group, which owns 13.57% of Barakah.

But at the moment, the spotlight is on Encorp.

After hitting a 10-month low of 61 sen on Jan 2 this year, Encorp’s shares strengthened more than 18% to close at 72.5 sen last Thursday. Trading volume in mid-January increased as well, indicating interest in the illiquid counter.

“Syed Mohamed is well connected — he is close to even Sultan of Johor Sultan Ibrahim Sultan Iskandar — so, hopefully, he can get things done for Encorp,” the source adds.

Checks on the Bursa Malaysia website regarding his appointment reveal that Syed Mohamed had done stints in Bank Bumiputra (M) Bhd (now part of CIMB Group Holdings Bhd), Bank Rakyat Bhd, the Johor State Economic Development Corporation, Advance Development Sdn Bhd (a wholly-owned subsidiary of Kulim (M) Bhd and, in turn, a unit of Johor Corp Bhd), Sime Darby Land Sdn Bhd, Encorp Group Sdn Bhd, TH Properties Sdn Bhd, Knowledge Economic City (Madinah, Saudi Arabia), DRB-Hicom Bhd and Iskandar Investment Bhd.

Interestingly, he is also the president and executive director of Johor-based Iskandar Waterfront Holdings Sdn Bhd, the chairman of Felda Investment Corp and Prasarana Integrated Development Sdn Bhd, among others.

With his involvement in Iskandar Waterfront Holdings, it is likely that Syed Mohamed is close to Sultan Ibrahim. Iskandar Waterfront’s shareholders include Kumpulan Prasarana Rakyat Johor Sdn Bhd, which has a 6.51% direct stake and a 22.06 4% indirect stake via Kumpulan Prasarana Rakyat Johor, the southern state’s investment arm.

Others who left Encorp alongside Mohd Isa are Datuk Noor Ehsanuddin Mohd Harun Narrashid and Datuk Hanapi Suhada — appointees of FELDA. They have been replaced by Datuk Muzzammil Mohd Nor and Hussein Ismail, whose mandate is to safeguard FELDA’s interests.

The land authority has been in control of Encorp since August 2014 when it acquired the company’s shares at RM1.55 each. There have been some property launches since but nothing significant has happened at the company.

At the end of October in 2016, Encorp set up Encorp Bukit Katil Sdn Bhd to develop a 641-acre tract in Bukit Katil, Melaka. The unit has signed three deals to jointly develop parts of the land.

However, plans for two of these developments — with Tiong Nam Transport Bhd and Kean Leng Construction Sdn Bhd — have been aborted, leaving only a joint venture with Sinmah Development Sdn Bhd to develop RM865 million worth of commercial units, a medical college and a hospital, among others.

Encorp had acquired the tract in Bukit Katil from FELDA for RM583.6 million and was expected to pay for it on a deferred basis over 13 years.

The Bukit Katil project had an estimated gross development value of RM5 billion but this was scaled down due to the soft property market. The initial plan was to launch the first phase of the development in the second half of 2017.

For its nine months ended September last year, Encorp suffered a net loss of RM2.2 million on revenue of RM206.6 million. On its prospects, Encorp says, “The outlook for the property sector remains mixed … RAM Ratings has shifted its outlook for the residential property sector for 2017/2018 from negative to stable and its premise for this is the expectation of a slow but gradual pick-up in market activity after the lull of the last several years.

“However, there are some quarters that have taken a pessimistic outlook, citing an overhang in certain property subsectors, stringent lending by banks and a cautious investor approach, which are all contributing to a subdued property market.”

While the counter closed at 72.5 sen last Thursday, Encorp’s net asset value per share as at end-September was RM1.53. Other than the Bukit Katil land valued at RM380 million, Encorp has a RM19.43 million parcel in Perth, Australia, a RM25.98 million parcel in Daerah Johor Bahru and a RM23 million parcel in Penang.

With these attractive pieces of land and strong ownership, will Encorp start to show better results?

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