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Tadmax to return to the black in FY18

KUALA LUMPUR (Feb 23): Tadmax Resources Bhd, whose losses widened in the first nine months of 2017, expects to be on a better footing this year with the bulk of the group’s short-term financial commitments largely resolved.

Shareholders of Tadmax today gave the group the go-ahead to issue up to 245.13 million shares — representing some 31% of its enlarged share capital — through private placement and capitalisation exercises after it scrapped a two-for-five rights issue with warrants proposed previously.

The share issue will turn directors’ advances to equity (RM17 million), to fund its affordable housing venture in Labuan (RM12.5 million) and the preparation of its power plant project in Pulau Indah (RM18 million), and also to satisfy the balance acquisition consideration of 45% stake in Wawasan Metro Bina Sdn Bhd (RM32.5 million).

The group is banking on its property segment — particularly Mizumi Residences in Puchong — to return to the black in its financial year ending Dec 31, 2018 (FY18), said executive director Datuk Noel John after the group’s extraordinary general meeting today.

This, he said, followed what he described as a kitchen-sinking episode in FY17 to clean up the group's balance sheet.

“We want to clear our debt at the holding company level,” said John. “Later on, all the operating companies will borrow on their own strength and they will pay off their borrowings at the subsidiary level. We [want to] ring-fence them individually, for each to be self-sustaining.”

Tadmax’s decision to defer the fourth phase of its property project in Ganggarak, Labuan — comprising a commercial centre with a gross development value (GDV) of RM323 million — resulting in a one-off recognition of foreseeable losses on infrastructure costs worth RM11.9 million in the third quarter ended Sept 30, 2017 (3QFY17).

Also dragging the property arm in 3QFY17, he said, was a 3% one-off marketing fee of RM8.6 million for Mizumi Residences in Puchong.

“That is why our bottom line took a bite...contributions are already creeping in [from Mizumi],” said John, adding that similar on-off costs are not expected to be present in FY18.

Tadmax has sold two-thirds of the three-block, 42-storey condominium units, which has a total GDV of nearly RM1 billion. Additionally, Wawasan Metro Bina is also undertaking the development of 1,520 affordable apartment units and 1,512 condominium units in Kepong, Selangor.

In the mean time, Tadmax also has the “challenging” task to acquire new landbank in the long run, with Selangor and Kuala lumpur being the preferred location. “It is already a bit of a stretch to operate in Labuan,” said John.

Hinting on joint ventures as a preferred method to acquire new lands, John said  the company intends to focus on residential units priced at under RM500,000 each, but did not provide any timeline for new launches.

On the RM3 billion combined cycle gas-fired power plant project in Pulau Indah, Tadmax said it will need to secure another RM27.18 million before development begins either by borrowing or internal funds.

Either way, the group expects a financial close on the project by early 2019. The plant is slated to commence operations of the 1,200 megawatt power plant — which typically takes three years to develop — by 2023.

Last November, Tadmax brought in Korea Electric Power Corp (Kepco) as the technical partner for the power plant.

The South Korean national utility firm is eyeing a 25% stake in the project. Tadmax, on the other hand, is required by the Energy Commission, which awarded the project to the company, to retain a controlling stake in the power plant.

The balance equity stake will be held by another strategic partner, which Tadmax will reveal soon. “They will also bring in the financial strength to fund this project,” John said.

“We are ahead of schedule as far as regulatory requirements are concerned,” added John. The company, he said, is in the “advanced stages” of formalising a power purchase agreement with Tenaga Nasional Bhd and gas supply agreement with Petronas Gas Bhd.

“The EPCC (engineering, procurement, construction and commissioning) tender process has just closed yesterday. Technical bids have been opened, the commercial bids will be opened shortly.

“We are also engaging financial institutions on the various types of financing structures,” said John, adding that they are discussing with local financial institutions due to its preference for sukuk issuance as a means of financing.

“We’ve been clearing up [our debt] over the last few years,” John said, adding that after the corporate exercises, its gearing level will be “almost negligible”.

Shares of Tadmax lost 1 sen or 3.39% to close at 28.5 sen today, giving it a market capitalisation of RM153.51 million. — theedgemarkets.com

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