This article first appeared in The Edge Malaysia Weekly, on January 4 - January 10, 2016.

THE Edge: Do you think the price for KFM — RM128 million for an 80% stake — is okay? KFM had net assets of RM52.63 million as at Dec 31, 2014, and a 20-year concession for the PM’s Office. You are paying more than two times KFM’s net asset value.

Azmir Merican: We think the deal is tightly structured. It’s a service company, so what we are buying is the people; the assets do not generate much revenue. Hence, you can’t accord an NTA-type valuation. We’ve structured a payment where we are paying RM36 million cash and we are issuing shares because our share price has risen quite a bit. Our share price, when I came in, was RM1.80 something. Now, it’s above RM3, so there is very little dilution. A slight impact only but even then, it’s accretive anyway.

But what is it about the FM (facility management) business that you like?

There are not many good ones (FM companies) out there but this one (KFM), they have been a tough competitor for us. And what they have done at PMO can be replicated. They have a 20-year concession to take the building to GBI Platinum (Green Building Index certification, of which the highest is platinum), which is obviously expensive as platinum is the highest grade.

But if you look at it, a lot of buildings have the potential to be GBI Silver or Gold, or even just GBI. The cost for doing that is not so prohibitive, so the ROI (returns on investment) can still be good.

And I think it’s also good for some entrepreneurial flair at UEM; it will shake up our team a little. I think it’s a good mix for us to have.

In its announcement to Bursa Malaysia, KFM states that it has about RM700 million in contracts. How much of this is from the PMO? What other significant contracts does the company have?

The PMO contract was for about RM880 million but there are only 17½ years left to go. So, that’s about RM624 million left. The KLCC retrofit will cost about RM22.5 million and the Tun Hussein Memorial contract about RM22 million. They (KFM) are in Dubai where they manage the FM for Dubai Creek Golf and Yacht Club, which is about RM25 million, and Emirates Golf Villa, which is RM20 million.

Back to the price tag … you paid RM36 million, which is 30% of the value. Usually, deposits are 10%. Is there any particular reason for this?

Actually, it’s not a deposit. The whole sum is payable upon completion. The first portion of RM92 million was in cash and shares, and the balance is because we want to ensure that KFM live up to their word as they have said they will build the business.

Were Nurolamin Abas and Fardan Abdul Majeed the only two parties you dealt with? I ask because KFM is said to be a politically connected company…

I actually only dealt with one party — CEO Nurolamin Abas and the people below him, no one else. The acquisition has nothing to do with politics.

Are there any fears or is there anything you are wary about regarding the KFM acquisition?

Let’s put it this way, the deal is done in a way that we only pay RM92 million up front. Their concession business is something we are fairly familiar with; it’s not as complex as managing hospitals. We understand their business very well; we think we can make improvements to their business.

Are you bidding for any interesting jobs now?

We are creating a few things. We have created UEM Sunrise and UEM Edgenta Township Management Services Bhd — the first time the two companies worked together.

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