MRCB eyeing UEM Builders

KUALA LUMPUR: Malaysian Resources Corp Bhd (MRCB), which is 38.9% owned by the Employees Provident Fund (EPF), is exploring the possibility of acquiring UEM Builders Bhd to strengthen its construction arm, said sources.

It is understood that MRCB has held preliminary talks with UEM Builders, the engineering and construction unit of UEM Group, for a possible takeover.

It is unclear why asset-rich MRCB, which last month sold two assets for nearly RM1 billion to help pare down debts of RM2.9 billion, would be interested to buy UEM Builders, which was delisted from Bursa Malaysia in November 2008. UEM Builders is wholly owned by UEM Group, which in turn is controlled by Khazanah Nasional Bhd.

A search by The Edge Financial Daily with the Companies Commission of Malaysia revealed that as at Dec 31, 2012, UEM Builders’ accumulated losses were to the tune of RM599.99 million. However, this was an improvement over the accumulated losses of RM635.06 million recorded in the previous year.

Interestingly, UEM Builders’ wholly-owned unit UEM Construction Sdn Bhd and its joint venture (JV) partner Bina Puri Sdn Bhd have been in the limelight in recent months due to delays over the completion of klia2 in Sepang. The JV, in which UEM Construction holds a 60% stake and Bina Puri the rest, has been incurring liquidated and ascertained damages of RM199,445.40 a day since the middle of last year.   

UEM Builders posted a net profit of RM76.41 million for the financial year ended Dec 31, 2012 (FY12), compared to a net loss of RM154.5 million the previous year. Revenue for FY12 improved 2.1 % to RM2.26 billion from RM2.21 billion in FY11, while total liabilities stood at RM1.71 billion and RM2.17 billion in FY12 and FY11 respectively.

The size of UEM Builders’ current order book is not known, but on its website, it stated that its ongoing local projects include the mass rapid transit (MRT) jobs — the construction and completion of elevated stations — and other works at The Curve, One Utama and Taman Tun Dr Ismail as well as the MRT construction work involving the elevated guideway and underground tunnel from Sungai Buloh to Kajang, including three elevated stations in Saujana Impian, Bandar Kajang Station and Kajang Station.

Other projects by UEM Builders include the widening of the fourth lane from the Shah Alam Interchange to Rawang/Jalan Duta Toll Plaza and Nilai (Utara) to Seremban.

UEM Builders and MRCB had worked together previously, under a 51:49 joint venture called UEMB-MRCB JV Sdn Bhd. Should the acquisition materialise, MRCB will be able to leverage UEM Builders’ international experience and jobs, said sources.

In a report dated Dec 10, 2013, RHB Research Institute Sdn Bhd noted that while prospects for the construction sector are strong, underpinned by an extended up cycle driven by the RM73 billion Klang Valley MRT project, MRCB is not a good proxy to the sector given its seemingly downsized construction operation, coupled with persistent construction losses due to weak project execution.

RHB Research pointed out that MRCB’s outstanding construction order book currently stands at RM1.45 billion. The projects include the LRT line extension (RM738 million), building jobs at KL Sentral (RM479 million), Phase 3 of Kuala Sungai Pahang breakwater and Giant hypermarkets in Setapak and Kampar.

MRCB lists on its website four companies dealing in engineering and construction — MRCB Engineering Sdn Bhd, Milmix Sdn Bhd, Transmisson Technology Sdn Bhd and Region Resources Sdn Bhd.

Last month, MRCB disposed of its entire 30% stake in Duta-Ulu Kelang Expressway for RM228 million to Ekovest Bhd and its Platinum Sentral project in Kuala Lumpur to Quill Capita Trust for RM750 million.

This article first appeared in The Edge Financial Daily, on February 13, 2014.

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