KUALA LUMPUR (Oct 28): Malaysian Resources Corp Bhd has been awarded the RM1.632 billion job to regenerate and upgrade the Bukit Jalil National Sports Complex into the Kuala Lumpur Sports City (KL Sports City) for which it will be repaid by the government with three pieces of leasehold land, totalling 92.5 acres nearby.

The job was awarded to MRCB’s subsidiary Rukun Juang Sdn Bhd, which was chosen by the federal government for offering “the best overall development concept”, after 11 companies submitted proposals in an open nation-wide tender, MRCB said in a statement this evening.

The tender process was undertaken by the Public Private Partnership Unit (UKAS).

A privatisation agreement (PA) in relation to the job and the transfer of lands was signed in Putrajaya today by Department of Lands and Mines director-general Datuk Dr Sallehuddin Ishak, with Rukun Juang director Kwan Joon Hoe, and Ministry of Youth and Sport’s secretary-general Datuk Jamil Salleh.

In its filing with Bursa Malaysia, MRCB said the transfer of the three tracts located near the National Sports Complex to Rukun Juang is in exchange for the RM1.6 billion cost of the project that the group will bear.

The contract sum represents a premium of about RM32 million or 2% over the market value of the tracts, but MRCB said it was reasonable, as the lands present it with an opportunity to undertake a mixed development in a fast-developing suburban area of Kuala Lumpur.

Rukun Juang is a 85%-owned unit of MRCB Land Sdn Bhd, which in turn is a wholly-owned subsidiary of MRCB. The remainder is owned by Rasma Contractors.

It is worth noting that among others, MRCB group managing director Tan Sri Mohd Salim Fateh Din and Employees Provident Fund (EPF), each hold an 85% indirect stake in Rukun Juang.

Former Federal Territories and Urban Well-being Minister and Lembah Pantai Umno division chief Datuk Seri Raja Nong Chik Raja Zainal Abidin and his wife, Datuk Seri Nafesah Raja Nong Chik Abidin, also each hold a 15% indirect stake in Rukun Juang.

MRCB said Rukun Juang will fund its obligations under the agreement via bank borrowings and/or advances from its shareholders, the quantum of which is yet to be fixed.

Rukun Juang’s issued and paid-up share capital now is only RM300,000, comprising 300,000 shares. Under the PA, it will have to have an issued and paid-up share capital of at least RM5 million to undertake the job.

As such, MRCB Land and Rasma Contractors have agreed to proportionately increase their shareholdings in Rukun Juang to achieve that.  

MRCB expects to fund its future subscription of shares in Rukun Juang, and any shareholders’ advances to be provided to fulfil the PA, via internally-generated funds, bank borrowings and/or equity fund raising.

The project will be undertaken in two phases; the first is to get the national stadium ready to host the 2017 Southeast Asia Games. The second phase will commence once the SEA games are over and will create KL Sports City, a fully-integrated sports hub with, among others, world-class infrastructre and a sports-focused mall.

Phase 1 is to be completed in 18 months and will begin one week after the necessary approvals are obtained. Phase 2 — to begin no later than Jan 1, 2018 — is slated to complete in three years.

“Securing such a strategic land bank with development potential is in line with the company’s strategy of increasing its focus in the property development segment, as its core business,” said MRCB.

The development plans for the lands have yet to be finalised at this juncture, but is expected to contribute positively to the company’s earnings and financial position in the future, it added.

MRCB's (fundamental: 1.3; valuation: 2) shares closed unchanged at RM1.19 today, for a market capitalisation of RM2.13 billion.

(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.)