MPHB a surprise RAPID winner

PETALING JAYA: While oil and gas (O&G) companies are already identified as prime beneficiaries of the US$20 billion (RM60.8 billion) Refinery and Petrochemicals Integrated Development (RAPID) in Pengerang, Johor, a surprise winner arising from the project is Multi-Purpose Holdings Bhd (MPHB).

MPHB, which is undergoing a makeover to become a pure number forecast operator (NFO), has 4.641.3 acres of plantation land in Pengerang with some portions fronting the sea. The land is said to be next to the site where the various RAPID projects are to be located.

According to MPHB's annual report for the financial year ended Dec 31, 2010, the land has leasehold status with another 920 years left. The lease will only expire in 2930. The land is booked into the MPHB books at RM79 million based on a revaluation carried out on March 28, 2011.

"However, the cost to MPHB is very much lower as this is among the parcels of land that have been in its books for a long time," said a source. "Before the RAPID project came about, MPHB was content to leave it [the site] as a plantation asset. But now it has other plans that can be carried out over the longer term as and when RAPID crystalises.

"Some of the land can be set aside for an industrial park and a large portion for a township development to cater for those working in RAPID."

MPHB officials could not be contacted for comment.

Last week, Prime Minister Datuk Seri Najib Razak unveiled Petroliam Nasional Bhd's (Petronas) plan for a US$20 billion O&G project in Pengerang that will see the setting up of a refinery, naptha cracker and possibly a regasfication plant. Apart from Petronas' investments, Dialog Group Bhd is building a RM5 billion independent deepwater petroleum terminal.

The feasibility studies will only be concluded later this year. But analysts are forecasting the economic spin-offs anticipated from the project to be about RM100 billion.

O&G-related companies such as process equipment players, onshore engineering, procurement and construction (EPC) companies, plant maintenance companies as well as supporting equipment manufacturers are deemed the major beneficiaries of RAPID. Property developers are also expected to reap the benefits by virtue of holding land in Pengerang.

According to RHB Research Institute, the project is slated to benefit Petronas Chemicals Group Bhd due to the proposed petrochemical complex which would produce highly specialised chemicals such as propylene and ethylene oxide. Other beneficiaries include KNM Group Bhd, Wah Seong Corp Bhd, Dialog and Pantech Group Holdings Bhd.

Just like for its other property assets, MPHB is likely to dispose of or carry out joint development for its Pengerang plantation land.

"The company has several options because it is a large tract of land. Half the land can be sold for the development of an industrial park while the other half can be developed jointly just like the strategy employed currently by the company," said an analyst. "MPHB does not have a property development arm and so a joint development makes sense."

MPHB is currently in the process of completing a corporate exercise that will see the diversified company own 100% of Magnum Corp Bhd, the biggest NFO in the country.

MPHB holds 51% of Magnum while private equity firm CVC Capital Partners owns 47%. The management of Magnum owns 2% of the NFO. MPHB will acquire the rest of Magnum via a combination of shares and cash.

In a move to become a pure gaming company, MPHB has started developing its landbank via strategic alliances and looking at divesting its interest in non-core assets such as the building which houses its headquarters. The proceeds from the development are expected to help pare down debts undertaken for the takeover of Magnum.

In this respect, the company has entered into a joint-venture agreement with Bandar Raya Development Bhd (BRDB) to develop three parcels of land in Rawang and Gombak in Selangor, and Penang projected to have an estimated gross development value of RM1.4 billion, RM2.2 billion and RM605 million respectively.

Under the agreement, BRDB is to give MPHB some 22% of the sales from the development of these parcels of land. BRDB also has to make an upfront payment of RM65 million to MPHB.

According to an industry source, the JV with BRDB could contribute up to RM100 million to MPHB's top line for seven to 10 years, the duration of the proposed development. The company stated that the rationale for the JV is to unlock the value of the land, and a part of its asset rationalisation exercise, which includes the privatisation of Magnum.

"During the restructuring of Magnum group in 2008, MPHB cherry-picked certain non-core assets including the land to boost its investment portfolio. The joint-ventures will allow MPHB to unlock the maximum values of the land over the next decade," it said in the announcement.

Apart from developing the land via a tie-up, MPHB is also seeking to sell its 40-storey office building in Kuala Lumpur for about RM350 million to RM400 million, which works out to be more than RM900 per sq ft. According to a source familiar with the talks, the arrangement is made to further position the company as a pure gaming player.

It is clear that MPHB is looking to further divest its non-core assets, as it focuses on being a pure-gaming player. Analysts and industry officials already anticipated this prior to the RAPID investment announcement by Petronas that the parcels of land in Pengerang would be the next in line to be divested by MPHB.

However, with the recent proposed development surrounding the area, that is a wrong bet.

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