A&W PJ to make way for RM263m office towers

The redevelopment of the site is to unlock the potential value of the property, says Wan Mohd Nor

KUALA LUMPUR: KUB Malaysia Bhd, which holds the A&W franchise in Malaysia and Thailand, plans to transform its landmark A&W restaurant in Section 52, Petaling Jaya (PJ) into two office towers with a gross development value (GDV) of RM263 million next year, said its group managing director Datuk Wan Mohd Nor Wan Ahmad.

To be known as KUB Tower, the project will feature two towers with 10 floors and 15 floors respectively, joined by a five-storey podium on a one-acre (0.4ha) piece of land.

“The board of directors has recently approved the proposal to build the office towers on the A&W site in PJ. The groundbreaking ceremony is expected to be held early next year and the expected completion date will be in 2018,” he told The Edge Financial Daily in an interview.

Wan Mohd Nor said the redevelopment of the site is to unlock the potential value of the property, which is located in a prime area near Amcorp Mall and the Taman Jaya light rail transit station, and has an estimated current market value of RM25 million.

“I can tell you that many people are eyeing that plot of land. We are building office towers there to diversify our earnings base and unlock its potential value,” he said, adding that the current A&W restaurant will be closed by year-end and will be relocated to one of the new buildings when completed.

The project will mark KUB Malaysia’s maiden foray into the property market. KUB Malaysia, through its unit KUB Builders Sdn Bhd, has experience in constructing schools, colleges and stadiums. Last year, the unit contributed 6% to the group’s revenue.

Wan Mohd Nor said the disposal of the group’s entire stake in A&W Restaurants (Thailand) Co Ltd for “not less than RM5 million” will be completed in the next two months, once the relevant due diligence and other processes are completed.

However, he stressed that KUB Malaysia is maintaining its “not for sale” stance on its 40% stake in A&W (Malaysia) Sdn Bhd after the loss-making fast-food chain managed to turn itself around and made a net profit of RM1.89 million last year.

Wan Mohd Nor said KUB Malaysia will not be selling any of its assets or divesting any of its businesses for now. It is targeting its business yield to reach a sustainable level of between 12% and 13%.

“We are ready for our next phase of growth and our latest financial results speak volumes of our efforts. Our fundamentals remain strong, with [our] gearing ratio reduced to 0.28 times [and a] business yield of 9% last year.”

Wan Mohd Nor dismissed reports that it is bidding to build a waste-to-energy (WTE) incinerator in Taman Beringin, Kepong.

“We did not bid for a WTE incinerator project in Taman Beringin, but we have submitted a proposal to build a WTE incinerator on a six-acre land in Labuan, Sabah, which has a processing capacity of 100 tonnes per day. That will be converted to three megawatts [of] electric energy daily,” he said.

He added that KUB Malaysia plans to bid for more incinerator projects in areas where “it lacks presence”, such as Johor, Melaka and Negeri Sembilan.

The cost to build a 100-tonne per day WTE incinerator is about RM100 million. The cost to build a 1,000-tonne per day WTE incinerator is reportedly between RM800 million and RM1.2 billion.

KUB Malaysia, in a 40:60 joint venture with Berjaya Corp Bhd, operates a 700-acre landfill in Bukit Tagar, Selangor, under a long-term government concession.

As for its agro business, KUB Malaysia targets to grow its land bank – particularly in Sabah and Sarawak – from its current 20,000ha to 50,000ha in the next three years, depending on the “right price and sensibility of land valuation”, said Wan Mohd Nor.

On the construction of its RM50 million oil palm mill in Mukah, Sarawak, work on which started last year, Wan Mohd Nor said it should be completed by mid-2015. The mill, with a capacity of up to 60 tonnes per hour, is expected to produce 380,000 tonnes of crude palm oil per year, generating an annual turnover of RM130 million.

The bulk of KUB Malaysia’s net profit last year was driven by its agro business, which contributed RM10.36 million in net profit despite a lower revenue contribution of 3.8% or RM35.2 million.

On its energy business, Wan Mohd Nor said the government should remove the hefty subsidy on liquefied petroleum gas (LPG), which is about 50% of the LPG cylinder cost.

“At the moment, the government is controlling both the LPG subsidy and selling price. This hurts the industry as the profit margin in this business is very thin. I urge the government to withdraw the subsidy and let market forces dictate the selling price.”

Currently the government, though the domestic trade, co-operatives and consumerism ministry, subsidises RM2 for every 1kg of LPG sold in the country, bringing the LPG retail price to RM1.90 per kg.

KUB Malaysia counts Umno-linked Gaya Edisi Sdn Bhd and Minister of Finance Inc as its shareholders, with 29.62% and 22.55% stakes respectively.

This article first appeared in The Edge Financial Daily, on July 21, 2014.