MALAYSIAN RESOURCES CORP BHD (MRCB) has been in the crosshair since Tan Sri Mohamad Salim Fateh Din and his son Mohd Imran officially took over the reins in September 2013.

Within less than two years, the group has recorded a string of major transactions, involving the divestment of its 30% stake in Duke Expressway for RM230 million and injection of Platinum Sentral into Quill Capita Trust for RM740 million, and the acquisition of choice land parcels such as MX1 in Kwasa Damansara and, recently, the German Embassy site for a total of RM1.08 billion.

These are part of the broad plans by Salim and Imran to deleverage MRCB while at the same time, accumulating choice landbank for the group’s urban and transit-oriented property development activities. This is just the beginning, according to the duo.

Below are excerpts of the interview with them.

The Edge: Tan Sri, how’s it been since you took over MRCB?
Salim: It has been great. The construction and development parts are easy, as we were doing similar things in Nusa Gapurna (a private vehicle owned by the family that was subsequently injected into MRCB). It’s just that we had to adjust ourselves, being in a public listed company.

By taking over MRCB, you also took over a lot borrowings, legacy issues…
Imran: MRCB is an old company. In the past, it had developed and held on to a lot of buildings. When you do that, yes, top line or revenue goes up but you will also have to pay the banks (to service the loans that funded the development), so what you get left in the bottom line is very little. So, one of key things we came up with is a strategic plan, to de-gear and how we can enhance the value of MRCB. We wanted a realistic debt ratio that will allow us to grow ... our focus is on property development.

What’s your gearing like now?
Imran: Total debt is about RM3.5 billion, but RM1.3 billion is from EDL (Eastern Dispersal Link). The injection of Platinum Sentral into Quill Capita Trust could deleverage us by about RM500 million. We could undertake other corporate exercises, after which our gearing will be comparable to other property developers (for the property division and excluding EDL).

How do you plan to tackle the gearing stuck with EDL? Could a business trust be an option?
Imran: We have plans to monetise the EDL, we are working on it. [A business trust] is one of the options.

Are you still negotiating with the government regarding the EDL? Is it still possible for the government to acquire EDL?
Imran: No, that window is closed.

Some analysts are expecting a cash call from MRCB to pay for the MX1 land and German Embassy land…
Imran: Not at this juncture. We believe that through debt gearing and internal funds, we have enough to finance the two pieces of land.

Are there any other non-core assets that MRCB can monetise?
Imran: There are a few and we will bring it up to the board when the time is right. We don’t want to monetise just for the sake of showing profits.

Are you still looking for more land? How is it that you can still acquire more land while your gearing is still high?
Imran: Yes, we are still looking to acquire more land. As to how we would fund it… land acquisitions take time, we can time the acquisitions with our de-gearing exercise. The two acquisitions (MX1 and German Embassy sites) took us about a year.
In reality, if we want to be a serious developer, we need to replenish landbank. The longer we wait, the cost goes up. Some of the land we are buying now… we gear up, but the banks understand that we have a very clear exit strategy. There are two to three banks involved, and they are also helping us with the deleveraging exercise.

Do you think MRCB has too much exposure to the high-end, high-rise segment, which could be risky given the current market condition?
Imran: We are a CBD (central business district) developer, TOD (transit-oriented development) developer. Our concept is that we have everything in one place. We can have the mall, offices, hotels, residences and even a niche hospital. We have different products within a development to attract the footfall and demand.
Salim: We need to choose good pieces of land, and after we get it, we need to come up with the product. We are still going to go on TOD. Our emphasis is on public transport. That is our niche.

So when will you launch MX1?
Imran: We are looking at sometime around 2016 or 2017, when both the train stations are ready. The whole line will be operational by 2017.

This year you’re planning to launch RM2 billion to RM3 billion worth of properties, we hear.
Salim: We launched 9 Seputeh last year. The immediate one this year is Jalan Kia Peng, GDV of about RM400 million. We are also looking at launching Semarak City in Setapak, 20 acres with RM3 billion GDV, (Lot) 349 as well. We are also launching our last phase in Kajang Utama, GDV is RM200 million, and we are also targeting a launch for the Hundred Quarters in Brickfields this year…

Is there an issue with the land transfer of Hundred Quarters?
Salim: There should not be one. It’s just a process.

What are your chances of winning the bid for the French Embassy land?
Salim: They [French Embassy] have to make an announcement. We don’t even know who is number one, two or three. But it’s a tender — best man wins.

On your construction division, are you going to scale down on construction or are you still actively looking for jobs?
Imran: The construction industry has naturally been picking up over the past one year. We have also won a lot of tenders. The division is already showing signs of improvement, so there’s no need for us to scale down. We could already see in 2013-2014 that construction margins were improving, so I think the numbers speak for themselves. Scaling down [on MRCB’s construction] is not a necessity at this juncture.

What’s your total GDV at the moment?
Salim: We are RM30 billion already. We brought up our total GDV over the past two years. The German Embassy land will be a nice product because it’s in Jalan Kia Peng, facing the Traders’ Hotel and KLCC. It’s two acres, so it’s easy to quickly turn it around.

Any more plans for KL Sentral?
Salim: We have big plans to regenerate KL Sentral. Under our regeneration scheme, we want to integrate ourselves to Muzium Negara, and with the Lake Gardens. We want to create more open spaces so we can connect to these locations.

On the Penang government’s proposal for the Sky Cab cable car system, how much cost would MRCB have to incur?
Imran: To be clear, we have no commitment with the state, and the state has no commitment to us. Our commitment is that we will study it first. It is going to be a tourist attraction more than anything else — it’s not a transport item.

This article first appeared in The Edge Malaysia Weekly, on May 4 - 10, 2015.

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