Johor ruler said to be interested in BAssets' land reclamation project

This article first appeared in The Edge Malaysia Weekly, on October 2, 2017 - October 08, 2017.
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SULTAN of Johor Sultan Ibrahim Sultan Iskandar, who is expected to emerge as a substantial shareholder in Berjaya Assets Bhd (BAssets), is said to be interested in the group’s land reclamation project near the Johor Strait, according to sources.

It is worth noting that loss-making BAssets has the right to reclaim 55 acres adjacent to Berjaya Waterfront in Johor, which will enhance the value of the development.

The group has successfully refurbished the property for less than RM20 million after acquiring it from duty-free operator Atlan Holdings Bhd for RM325 million in 2012.

“The Sultan of Johor is keen to take a substantial stake in BAssets as the land reclamation project is near his palace and, of course, the development is taking place in his state,” a source tells The Edge.

A check on Google Map shows that Berjaya Waterfront is only a four-minute drive or 2.4km from Istana Pasir Pelangi and a 14-minute drive or 9.5km from the majestic Istana Bukit Serene.

Istana Pasir Pelangi is the home of the Crown Prince of Johor and his family while Istana Bukit Serene is the official residence of the Johor ruler.

Citing two sources, The Edge Financial Daily last Thursday reported that Sultan Ibrahim bought 80 million shares or a 6.7% stake in BAssets off market on Sept 27.

It is learnt that he bought the shares at RM1 apiece, representing a 14.5% discount to the counter’s closing price of RM1.17 on that day.

Sources also say Sultan Ibrahim is likely to continue mopping up BAssets shares to at least a double-digit percentage stake.

At press time, the ruler’s total shareholding in BAssets was still unknown.

As required by the Companies Act 2016, a substantial shareholder must notify a company of any change in his or her shareholding within seven days.

Ultimately controlled by business tycoon Tan Sri Vincent Tan Chee Yioun, BAssets was the developer of Berjaya Times Square in Kuala Lumpur, one of the country’s largest retail and commercial projects. The group also owns Natural Avenue Sdn Bhd, which operates a number forecast business in Sarawak.

BAssets also has a licence agreement with Greyhound Café Co Ltd to set up and operate cafés under the latter’s trademark in Malaysia.

It is worth noting that Berjaya Waterfront’s duty-free zone has 35,000 sq m of retail space as well as a hotel, which has a convention centre and business-class rooms. The duty-free zone also includes a ferry terminal that is used by passengers from Indonesia’s Batam and Bintan islands.

“Berjaya Waterfront is already located in the country’s southernmost city and is minutes away from the main causeway link to Singapore. With the land reclamation, it is literally the nearest [point on] Malaysian territory to Singapore ... edge to edge,” says another source.

Furthermore, Berjaya Waterfront is in close proximity to the Sultan Iskandar Customs, Immigration and Quarantine Complex, railway station and central business district in Johor Baru.

Meanwhile, sources reveal that a few Chinese land reclamation contractors, including China Communications Construction Co Ltd (CCCC), have met Tan to offer their services.

No firm decision has been made so far, but BAssets is likely to appoint CCCC as it offers the best package, says a source.

BAssets executive director Koh Huey Min was reported as saying in August that the environmental impact assessment on the land reclamation project has been secured and the group is in the process of submitting the environment management plan and seeking planning approval.

She added that the reclamation can only start next year as approval will only be obtained in three to six months.

The group estimates a reclamation cost of less than RM200 psf, significantly lower than the highest recorded transaction price of RM800 psf for the area.

“Even if I were to give a 50% discount at RM400 psf, we still have a value of about RM1 billion,” Koh was quoted as saying.

“And this is only looking at the value of the land. We have earmarked it for a mixed-use development, comprising hotels, residential units and probably hospital facilities. This will definitely push the gross development value beyond RM1 billion.”

She said the reclamation will take less than two years, but added that BAssets is not in a hurry to complete the development, considering current market conditions. The project will likely be developed in phases over 10 to 15 years.

Coming back to Sultan Ibrahim’s off-market transaction, it is not yet publicly known who the seller of the 6.7% stake is. Tan held a controlling 63% stake in BAssets — 37.7% direct interest and 25.3% deemed interest via Berjaya Corp Bhd — as at Aug 17.

Interestingly, the Johor ruler has already invested in several companies in which Tan also has a stake. They are convenience store chain operator 7-Eleven Malaysia Holdings Bhd, telecommunications solutions provider REDtone International Bhd and U Mobile Sdn Bhd, the country’s youngest telecoms operator.

Last Wednesday, BAssets saw 80 million shares or a 6.7% stake traded off market. Bloomberg data shows that the shares were traded in five blocks, all at RM1 per share or RM80 million in total. The trades — one block of 20.22 million shares, one of 17 million shares, two of 19 million shares each and one of 4.77 million shares — were done between 3.30pm and 4.30pm.

Year to date, BAssets’ share price has risen 30%. The stock closed at RM1.18 last Thursday, giving the company a market capitalisation of RM1.4 billion.

Mercury Securities, the only research house covering BAssets, has a “buy” call on the stock, with a target price of RM1.62. This represents an upside potential of 37%.

BAssets saw its net loss narrow to RM11.11 million in the financial year ended June 30, 2017, from RM54.12 million previously.