MRCB to announce REIT exercise and disposal of Duke

KUALA LUMPUR: Malaysian Resources Corp Bhd (MRCB), which is expected to announce the injection of Platinum Sentral into Quill Capita Trust today, will also announce the disposal of its 30% stake in the Duta-Ulu Kelang Expressway (Duke) to Ekovest Bhd for RM228 million cash, sources said.

Meanwhile, Ekovest is expected to announce a proposed rights issue to finance the purchase of 30% of Duke, the sources added.

In an announcement on Jan 22, MRCB confirmed that its board of directors had on the day before “deliberated on the proposal to dispose of its stake in Duke.” It added that no agreement had been signed yet.

A RM230 million sale price for the 30% stake translates into a RM767 million full valuation. A Kenanga Investment Bank note pointed out that this is in tandem with the valuation done by Ekovest’s independent valuer, BDO, of about RM647 million to RM700 million in October 2013.

The sale is seen as a way for MRCB to reduce its debt and create recurring income.

MRCB’s debt-to-equity ratio stood at 197% as at Sept 30, 2013. The new head of MRCB Datuk Mohamad Salim Fateh Din also has a different view on non-controlling assets and plans to hive off non-core businesses.

The Duke highway has started to generate a healthy cash flow and has met its internal rate of returns. According to executives, it raked in some RM80 million in revenue in its first calendar year ended Dec 31, 2012.

The other 70% of Duke is owned by Ekovest through Wira Kristal Sdn Bhd.

Ekovest bought into Duke in May after it completed a share swap deal worth RM325.86 million with Wira Kristal. Under the deal, Ekovest issued 126.7 million new shares at RM2.57 each to the owners of Wira Kristal — Tan Sri Lim Kang Hoo (40%) and Datuk Haris Onn Hussein (60%).

In December, Ekovest was appointed master contractor for phase 2 of Duke costing RM1.18 billion. The contract is expected to be completed at the end of 2016.

Phase two will consist of two additional links, measuring nine km and seven km. The Duke highway currently stretches 18 km.

In December 2012, the government extended the concession term for Duke by another 20 years to 2059 as part of the agreement to extend the expressway. The additional investment on the phase 2 of Duke and the resulting longer gestation period could be a reason for MRCB to divest its stake in Duke.

Ekovest and MRCB are also 60:40 partners in the River of Life project via Ekovest-MRCB JV Sdn Bhd.

This article first appeared in The Edge Financial Daily, on January 29, 2014.


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