Still awaiting MPCorp’s turnaround

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LAST WEEK, after a gruelling five-hour-long AGM, Charles Ch'ng Soon Sen, CEO of beleaguered property outfit Malaysia Pacific Corp Bhd (MPCorp), told The Edge Financial Daily that things were likely to pick up. However, not all are convinced.

ch’ng_mpcorpCh’ng said, “We have already accepted the bank’s offer to restructure our outstanding revolving credit and bank overdraft facilities into term loans. This means we are paying lower interest rates. There will be more activities from us going forward.”

He went on to say that MPCorp was looking at property development projects on a 490-acre tract it owns in Johor.

He declined to speak to The Edge after the AGM, saying he had to rush off for a meeting. Over the years, Ch’ng and his father Datuk Bill Ch’ng have been keeping a low profile.    

But a minority shareholder says talk of a turnaround at MPCorp has been going on for a long time. “MPCorp has always been saying next year will be better. There was a joint venture to redevelop Wisma MPL in 2013, but it did not take off. [Then] in October 2013, MPCorp entered into a MOU with Black Sea Horizon Holdings (Ltd), a China state-owned enterprise, to develop its Johor land.

“The anticipated gross development value (GDV) was pegged at RM43 billion. Then it went silent. There were also plans to launch the Lakehill Resort City residential projects, Phases 4 M and 1A1, with an anticipated GDV of approximately RM300 million in the beginning of 2014. Now, at end-2014, nothing has been done,” he says, in explaining his scepticism.

He says any joint venture partner would treat MPCorp with caution after its issues with Amanah Raya Development Sdn Bhd, and the legal suit against Wisma MPL’s joint management body.

MPCorp failed to live up to its end of a settlement agreement with Amanah Raya over a joint venture to develop the Johor land, and was served with a notice of default by the latter after failing to pay the full settlement sum of RM120 million.

To recap, apart from the 490-acre land parcel in Johor, MPCorp’s only other asset is Wisma MPL, a 19-storey office tower in Jalan Raja Chulan, which is pledged to RHB Bank for RM80 million.

If not for revaluation gains and gains from the sale of assets, MPCorp has not posted a profitable quarter since as far back as FY2005 ended June.

Ch’ng, who took over the reins of MPCorp in December 2013, is likely to find the going difficult.

As at end-September 2014, MPCorp had cash and bank balances amounting to RM553,000, short-term borrowings of RM89.9 million and long-term debt obligations of RM895,000.

At end-October 2014, MPCorp announced that it had converted its two overdraft facilities of RM10 million and RM33.4 million, and a revolving credit facility of RM25.7 million into term loans.

However, the terms include MPCorp paying RM5 million to RHB by Jan 31, 2015, and RM10 million by end-March.

“Where is the money going to come from?” the minority shareholder asks.

Among his main grouses is that MPCorp is borrowing funds from its 56.4% parent Top Lander Offshore Inc. Top Lander first surfaced in MPCorp in November 2002 with 22% equity interest, and slowly increased its shareholding.

By November 2006, Bill Ch’ng emerged as the largest shareholder in MPCorp with a 48.4% stake. He was CEO until end-2013.

In January 2014, he was charged with 58 counts of insider trading in the group’s shares.

According to MPCorp’s annual report for FY2013, interest payable to Top Lander was RM2.1 million, while advances the latter made amounted to RM1.9 million. Top Lander was owed a total of RM21 million as at the end of FY2013.

MPCorp’s annual report states that interest rates for such borrowings range from 13% to 15%.

In its 2014 annual report, MPCorp states that “the group has recognised other income of RM8.1 million arising from the waiver of interest by the major shareholder of the group, Top Lander, on the amount owing by the group.”

It also stated that in FY2014, Top Lander advanced RM9.9 million to MPCorp and that in total, the former was owed RM24.5 million.

“The crux of the problem is a direct result of unrestrained expenses,” the minority shareholder says. He says the salary of the directors amounted to RM1.4 million for the year ended June 2014.

The resignation of white knight Tey Por Yee from the MPCorp board last week could be a blow to the company. Four directors, including two independent directors, did not seek re-election to the board. MPCorp appointed UHY as the new auditors after BDO Binder resigned in December.

Tey had surfaced in MPCorp with 5.2% in July 2014. Since his entry, MPCorp’s share price has declined 58%.

Protasco Bhd, a company in which Tey has 16.7% equity interest, is suing him and his partner Ooi Kok Aun for US$27 million in  damages for fraud and conspiracy, and general damages, aggravated and exemplary, as the two supposedly did not disclose their interests in oil and gas company PT Anglo Slavic Utama. The duo are selling a 75% stake in PT Anglo Slavic Utama to Protasco for US$55 million. However, Tey and Ooi deny all allegations and have counter sued.

It is likely that this resulted in Tey resigning as executive director at MPCorp.

Tey and MPCorp’s management had plans to raise RM322.2 million via a rights issue and cancellation of 50 sen par value from its RM1 shares, but whether this will take place remains to be seen.

 

This article first appeared in The Edge Malaysia Weekly, on January 5 - 11, 2015.