Friday 29 Mar 2024
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TWO outfits — a joint venture between WCT Holdings Bhd (fundamental: 0.6; valuation: 1.4) and Arabtec Holding PJSC, and a consortium comprising UEM Group Bhd and Samsung — are understood to be the front runners to bag the construction portion of the RM5 billion KL118 Tower (formerly known as Warisan Merdeka), industry sources say.

It is learnt that the two have put in “the best bids thus far, and are favourites to bag the large-scale job”, a source says.

Some of the bidders contacted by The Edge were also aware of WCT-Arabtec and UEM-Samsung leading the pack for the job, which is likely to be awarded by Permodalan Nasional Bhd in the next few months.

The two front runners are among six shortlisted bidders. The other four are a tripartite joint venture between IJM Corp Bhd (fundamental: 1.1; valuation: 1.4), Norwest Holdings Sdn Bhd and Shimizu Corp; a collaboration between Malaysian Resources Corp Bhd (MRCB) (fundamental: 0.6; valuation: 0.8) and China State Construction Engineering Corp; a partnership between TSR Capital Bhd (fundamental: 0.85; valuation: 1.2) and Daewoo Group; and a bid by Seacera Group Bhd (fundamental: 1.6; valuation: 3.0), which is partnering its 60% unit Spaz Sdn Bhd and China’s Sinohydro Corp-Shanghai Construction Group.

A UEM official says, “UEM’s subsidiary UEM Builders Bhd has submitted a bid for the project,” but did not elaborate.

UEM is a wholly-owned unit of state controlled Khazanah Nasional Bhd, which would indicate that it has deep pockets. UEM’s partner, Samsung, has participated in the building of many of the world’s skyscrapers including the 452m Petronas Twin Towers, which was the tallest structure in the world at the time of its completion. In 2010, Samsung delivered the Burj Khalifa in Dubai, which is currently the tallest building in the world at 828m and 163 storeys high.

Meanwhile, WCT has a strong partner in Arabtec. Arabtec, Samsung and Belgium’s Besix were the key players that built the Burj Khalifa.

Officials of WCT could not be reached for comment.

According to its 2014 annual report, as at end-March this year, WCT Capital Sdn Bhd — the vehicle of managing director Taing Kim Hwa and Wong Sewe Wing — was the largest shareholder with 19.5% equity interest in the construction company. Other substantial shareholders include pilgrim fund Lembaga Tabung Haji with 10.2%, the Employees Provident Fund (EPF) with 9.1%, Kumpulan Wang Persaraan (Diperbadankan) with 7.5% and AmanahRaya Trustees with 7.2%.

For the financial year ended Dec 31, 2014, WCT posted a net profit of RM120.5 million from almost RM1.7 billion in revenue.

As at end-December last year, WCT had cash and bank balances of RM950.8 million, long-term debt commitments of RM1.8 billion and short-term borrowings of RM584.1 million.

While UEM-Samsung and WCT-Arabtec are the front runners, industry sources do not discount the likes of MRCB nicking the job.

“Yes they are the front runners, but it’s not like all hope is gone … we are still hopeful. We have our strengths as well,” one of the other bidders says.

Some of the bids, it seems, were not competitive. Others were said to have dropped out. One source says that IJM and its partners have pulled out of the race, but this remains unverified. IJM managing director Datuk Soam Heng Choon could not be contacted, while some of the other senior officials were abroad.

IJM’s partners in the bid are Shimizu, a large Japanese construction company, and local firm Norwest. IJM had previously worked with Shimizu, together with UEM and Nishimatsu Construction, on the RM2 billion tunnelling portion of the Pahang-Selangor interstate water transfer project a few years ago.

Norwest is the vehicle of Aziz Bahaman, who has links to IJM — he was a director of Industrial Concrete Products Bhd, a unit of IJM.

While MRCB and China State Construction Engineering are not the front runners, sources say they cannot be written off.

“MRCB has built quite a few buildings — it does have the experience. And its partner [China State Construction Engineering] is a US$45 billion company … so they cannot be taken lightly,” one source says.

It is also noteworthy that MRCB is 38.4% controlled by the EPF.

For the year ended December 2014, MRCB reported RM152.6 million in net profit from RM1.5 billion in revenue.

As at the end of last year, MRCB had deposits, cash and bank balances of RM660.7 million. During the period under review, the company had short-term borrowings of close to RM1.4 billion and long-term debt commitments of RM1.2 billion.

TSR Capital, at its close of 84 sen last Thursday, had a market capitalisation of RM97.7 million. For the financial year ended December 2014, it posted a net profit of RM2.5 million from RM107 million in revenue.

Nevertheless, TSR’s partner — South Korea’s Daewoo Group — is one of the largest conglomerates in Asia. Daewoo Engineering & Construction Co Ltd has a market capitalisation of almost US$3 billion.

Seacera, at its close of 79 sen last Thursday, had a market capitalisation of RM143.3 million. Seacera’s partner and 60% unit, Spaz, is also relatively small, but the strength of its bid comes from its Chinese partner, Sinohydro Corp-Shanghai Construction Group. Seacera last October concluded the acquisition of 60% of Spaz for RM3 million. The other 40% is held by Mohd Azami Idris via his vehicle Actual Capital Sdn Bhd.

Spaz posted after tax profits of RM72,660 from RM36.9 million in revenue for the financial year ended December 2014.

It is noteworthy that Seacera’s partnership with the Chinese party was sealed in May last year in Beijing, during premier Datuk Seri Najib Razak’s visit to China.

Nevertheless, for the smaller companies, the payment of the performance bond — amounting to 5% of the construction cost — could be problematic. If the construction portion is RM3 billion, as stated in news reports, the performance bond could amount to RM150 million, which may deter some of the smaller companies.


Note: The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Visit www.theedgemarkets.com for more details on a company’s financial dashboard.

This article first appeared in The Edge Malaysia Weekly, on May 25 - 31, 2015.

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