Ekovest Bhd, the construction outfit of Tan Sri Lim Kang Hoo, stands to benefit from the development projects of Iskandar Waterfront Holdings Sdn Bhd (IWH). This is because Lim is a common shareholder of IWH, holding a 70% stake via Credence Resources Sdn Bhd and Ekovest. He is the single largest shareholder of the latter with a 28% stake.

Nephew Lim Keng Cheng, the managing director of Ekovest, owns 7.61% of the company and also has a small stake in Credence Resources.

Ekovest already has jobs worth more than RM100 million in IWH's gem Danga Bay in Johor. The company also recently tendered for RM1 billion worth of construction and reclamation jobs.

When asked about Ekovest's chances of winning the bids, Kang Hoo says: "Of course, we will need to compete with other contractors. If our bids are competitive, we should be able to grab some jobs."

But his being a shareholder of Ekovest could be the very reason the company may face a challenge in becoming an attractive Iskandar play. As it is, Kang Hoo has taken a lot of flak for land transactions in Johor as some detractors claim he received huge discounts on the purchase price, thanks to support from the state and Johor royalty.

There are also concerns that Johor is losing control of its land to entrepreneurs like Kang Hoo.

Game changer for Ekovest
A potential game changer for Ekovest could be China-based Country Gardens Co Ltd's RM18 billion mixed-use property project on 11ha of prime waterfront land in Danga Bay. Work on the project is scheduled to start in early 2013.

Given its track record, especially in reclamation works, Ekovest could be taking the lead in transforming the waterfront not only in Danga Bay, but also in other areas in Johor where IWH has been given the development mandate.

For the record, the company cleared a Felda estate in Lahad Datu, Sabah, that was the size of Singapore.

In Danga Bay, some 2,000 acres are set to be developed into an integrated waterfront city. IWH has been given the mandate to develop prime waterfront land in Johor Baru and Desaru that covers 4,000 acres in total.

Current market prices estimate the value of the land at RM5 billion, but this is debatable as most of the land is underwater.

Reclamation jobs of such size require much funding, but banks may not be keen to lend for such activity, given the risks involved. Plus, underwater land cannot be used as collateral. This may explain why Tebrau Teguh Bhd has joined hands with Ekovest to develop its 1,000 acres in Danga Bay.

Earnings-wise, Ekovest's net profit rose 40% to RM24.35 million from FY2007 to FY2011 while y-o-y revenue contracted from FY2009 to FY2011. The company sprang to life in FY2012 ended June 30. Net profit leapt to RM72.64 million, almost three times from RM24.35 million in the previous year. Revenue saw y-o-y growth of 63% to RM208.95 million from RM128.15 million previously.

But cash and cash equivalents dwindled, recording a deficit of RM59.3 million in the first quarter ended Sept 30.

According to the company, the shrinking cash flow and reserves was due to recent investments, including the purchase of parcels to facilitate the Klang Valley River of Life project.

What could offer Ekovest a solution is its Duta-Ulu Kelang Expressway concession, which will provide steady cash flow starting 2013.

Ekovest also has other assets that it could monetise, including its 25 acres of undeveloped land in Danga Bay. In fact, this land has been earmarked for a mixed-use project with a gross development value (GDV) of at least RM2 billion. Given the buzz in Johor Baru and the rise in the value of land there, it should not surprise if the 25 acres fetched a higher GDV.

"We will wait for the rest of Danga Bay to be developed first and we will see how our project can fit IWH's master development plan," said Kang Hoo in a recent press conference.

IWH has ambitious plans indeed. With the backing of the Johor government and, more significantly, the blessing of the sultan, its growth story is a promising one.

IWH has outlined several other developments in the western corridor, including a major transport hub for Iskandar Malaysia, a fisherman lifestyle-themed development covering 54 acres, a development to promote Malaysia's historical and cultural heritage as well as a 34-storey residential block.

The western corridor will be flanked by three major mixed-use developments known as The Venice, Danga Heights and JB Tanjung Puteri Waterfront. They will include commercial and retail outlets, serviced apartments and hotels.

On the eastern corridor, key developments under IWH include the strategically positioned Tebrau Coast, a 1,025-acre mixed-use development near the Eastern Dispersal Link, equipped with retail outlets, recreational areas and residential units.

IWH will also be spearheading the development of the central business district in Johor. Construction on the first phase is expected to commence in March 2013.

Ekovest's share price settled at RM2.52 last Thursday, at a slight premium to its book value of RM2.344 as at Sept 30, 2012. But looking at the scale of the projects that Kang Hoo's vehicle is undertaking in Iskandar Malaysia, there is upside potential for Ekovest.


This story first appeared in The Edge weekly edition of Dec 31, 2012-Jan 4, 2013.