This article first appeared in The Edge Malaysia Weekly on September 20, 2021 - September 26, 2021

LAST week, loss-making Encorp Bhd’s share price breached 40 sen for the first time since May 2019. The counter has gained more than 30% since early September when it was trading at 31.5 sen. At Friday’s close of 41 sen, its market capitalisation amounted to RM129.84 million.

Much of the excitement and gains in share price, market watchers say, stem from the appointment last week of three new directors at the property development company — Mohd Ali Abd Karim (independent non-executive chairman), Lukman Abu Bakar (independent non-executive director) and Datuk Shireen Ann Zaharah Muhiudeen (non-independent non-executive director).

Of the three, Shireen’s appointment raised the most eyebrows, as being a non-independent director means that she is a nominee of the Federal Land Development Authority (FELDA), a 62.3% shareholder of Encorp.

Shireen could not be reached for comment. Nevertheless, market speculation is that she will play a prominent role in Encorp — despite being in a non-executive position — and keep an eye on FELDA’s investment in the company.

“She is experienced, she is on the board of FELDA, she was with a regulator, she has been with some very good companies, a couple of banks … So, of course, the expectations are high, with what she may be able to do at Encorp,” says a market watcher.

But will her appointment be enough to reverse the losses at Encorp, which has made a loss in its last four financial years from 2017 to 2020? Can FELDA begin to enjoy some returns from its investment in the company?

For the six months ended June, Encorp suffered a net loss of RM3.7 million from RM62.51 million in revenue. For the corresponding period a year ago, the company suffered a net loss of RM23.66 million from RM51.88 million in sales.

Cash and cash equivalents stood at RM43.34 million, and other investments at RM122.15 million.

Encorp’s short-term debt commitments were pegged at RM130.76 million and long-term borrowings at RM677.93 million. Its finance costs for the six months were RM36.64 million, while accumulated losses amounted to RM61.3 million.

A look at Encorp’s FY2020 annual report indicates that its key assets are the Strand Mall — a four-storey retail mall in Kota Damansara valued at RM164 million — and Red Carpet Avenue, which comprises 29 terraced shopoffices located along the side of the Strand Mall, valued at RM136.69 million.

Encorp also has 15 office suites and 518 parking bays in Kota Damansara valued at RM26.02 million, and 65 residential apartments, 16 retail shops and 316 parking bays in Johor Baru valued at RM56.54 million.

In Western Australia, its three apartments in Victoria Park are valued at RM14.78 million and its 2.7-acre parcel of land in North Lake Road, Cockburn Central, Western Australia, has a value of RM8.5 million.

In addition, Encorp has parcels in Shah Alam, Selangor, valued at about RM23.5 million.

The damp property market now has put FELDA’s investment in Encorp under greater scrutiny. FELDA’s wholly-owned property development arm Felda Investment Corp Sdn Bhd (FIC) had acquired a 49.5% stake in Encorp in May 2014 at RM1.55 a share, forking out RM239.72 million for the block of shares from Sarawakian businessman Tan Sri Mohd Effendi Norwawi.

FIC’s acquisition had then triggered a mandatory general offer. Apart from the offer of RM1.55 per Encorp share, FIC also offered 55 sen apiece for the warrants and RM1.55 for the company’s redeemable convertible unsecured loan stocks (RCULS).

It ended up with 72.27% of Encorp and paid out a total of RM306.11 million.

Based on its close of 41 sen last Friday, FELDA’s stake in Encorp is now valued at just under RM80.8 million, which in turn means that the land development authority is sitting on a paper loss of more than RM225 million.

Just last month, market talk was rife that FIC was looking to sell its stake in Encorp but was asking for RM1 per share, which understandably did not generate interest in its offered block.

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