Tadmax to become a pure property and power play

TADMAX Resources Bhd managing director Datuk Seri Anuar Adam, a retired major of the Malaysian army, will focus on transforming the loss-making company into a property and power generation player after cleaning its books for the past five years.

Formerly known as Wijaya Global Baru Bhd, Tadmax is looking at selling its plantation land in Indonesia to help fund its foray into the property development and power generation businesses, Anuar tells The Edge.

“The plantation land in Indonesia is worth about US$40 million and we are talking to potential investors to dispose of it. [The reason is that] we feel plantations is a long-term business that could take 10 years to make money,” he says.

The company’s 2015 annual report shows that it owns about 80,000ha in Papua province in Indonesia. Acquired in December 2011, the land has a net carrying value of RM61 million.

It is not clear how Tadmax came up with the US$40 million valuation for the land, although Anuar says there were transactions in the vicinity for about US$700 per hectare. This means Tadmax could pocket about US$56 million or RM228 million from selling its 80,000ha, which would help fund its property development business.

To recap, on July 22, Tadmax bought the remaining 45% stake in Wawasan Maju Bina Sdn Bhd from Inas Angkasa Sdn Bhd, Impiria Jaya Sdn Bhd and Global Showcase Sdn Bhd for RM42 million. WMB is a property developer with a project in Kepong Metropolitan Lake-Garden in Kuala Lumpur.

“The acquisition of the remaining stake in WMB not only provides us with a foothold in the Kuala Lumpur property market but also gives us access to the expertise of the company’s management, which is led by a seasoned developer,” says Anuar.

On July 12, WMB received the development order for Mizumi Residences, which features 1,520 affordable apartments and 1,512 condos, and has a gross development value of close to RM1 billion.

Tadmax has been loss-making since its financial year ended Dec 31, 2008 (FY2008), when it was still known as Wijaya Baru Global. In FY2015, it registered an operating loss of RM8.83 million.

However, the group made a net profit of RM68 million last year, following the disposal of Tadmax Power Sdn Bhd, a wholly-owned subsidiary that owned 319 acres of leasehold land in Pulau Indah, Selangor, to Ivory Merge Sdn Bhd, a subsidiary of 1Malaysia Development Bhd.

WMB managing director Datuk Gan Seong Liam, who is also a substantial shareholder of Global Showcase, will remain as the company’s managing director until the completion of Mizumi Residences.

Gan has been in the property development business since the early 1980s. Under his private vehicle Maxim Holdings Sdn Bhd, he is currently developing two other projects, namely Maxim City Lights in Sentul and Maxim Residence in Alam Damai, Cheras.

Tadmax had dabbled in property development in Labuan but the project did not give the group good returns because it was earmarked for affordable housing, recalls Anuar. Called Ganggarak Permai, the project was commissioned by Labuan Corp.

In June, Tadmax entered into a sales and purchase agreement (SPA) with Labuan Corp on the en-bloc sale of Block C of Ganggarak Permai for RM50 million. The block features 260 affordable apartments.

“The property development sector in Labuan is very challenging as everything has to be sourced from
either Sarawak or Peninsular Malaysia. Transport adds to the cost of developing houses there,” says Anuar.

With WMB becoming a wholly-owned subsidiary of Tadmax, the group expects to achieve a revenue of RM300 million next year through Mizumi Residences, which is targeted to be launched in the fourth quarter of this year.

Anuar says Tadmax is also awaiting approval from the Cabinet for the construction of a 1,000mw gas-powered plant on 60 acres owned by the group in Pulau Indah. Construction of the plant is expected to cost about RM3 billion, he adds.

The land was initially slated to be sold to Inai Kiara Sdn Bhd for RM48.4 million. However, on June 24, Tadmax announced that the SPA with Inai Kiara had been mutually terminated.

Since taking over a 26.2% stake from Wijaya Baru Global’s largest shareholder Datuk Seri Tiong King Sing in December 2011, the group’s top management has cleaned its balance sheet by disposing of some of its assets and businesses.

A particularly interesting asset disposal was to Ivory Merge, a unit of TRX City Sdn Bhd (formerly 1MDB Real Estate Sdn Bhd), for RM294.4 million in July last year.

The deal was criticised by opposition politicians, who said Ivory Merge had overpaid for Tadmax’s Pulau Indah land, which had been revalued at RM163.6 million on Aug 4, 2011. However, the land status was converted from building to industrial before the deal was announced.

Opposition parliamentarian Tony Pua alleged that the deal was a bailout of Tadmax as it was the reincarnation of Wijaya Baru Global — a company whose subsidiary was alleged to have sold 753 acres in Pulau Indah to the Port Klang Authority at an inflated price.

Thus, Tadmax’s deal with Gan and other shareholders of WMB may be a stepping stone for it to shed its scandalous past and become a true-blue property developer. WMB’s expertise and a well-connected major shareholder will do wonders for Tadmax in the property development industry.

However, it might still have to deal with being considered a politically linked company, thanks to being awarded the power plant project though it does not have a proven track record in the area.

This article first appeared in The Edge Malaysia on Aug 1, 2016. Subscribe here for your personal copy.