MRCB mulls divestment of Duke

KUALA LUMPUR: Malaysian Resources Corp Bhd (MRCB), which is now under the helm of entrepreneur Datuk Mohamad Salim Fateh Din, is mulling the divestment of its 30% stake in the Duta-Ulu Kelang Expressway (Duke), sources said.

It is understood that MRCB is seeking a valuation of between RM180 million and RM200 million for its 30% stake in Duke, which has started to generate a healthy cash flow and has met its internal rate of returns.

“The valuation is based on the recent transaction at Wira Kristal [Sdn Bhd]. MRCB’s 30% stake was valued at RM140 million for the ordinary shares, but if it were to capitalise on the redeemable convertible preference shares (RCPS), this brings the sum to RM200 million,” said a source.

MRCB is already in talks with several parties although Ekovest Bhd, which controls the remainder 70% stake in Duke, has the first right of refusal.

Ekovest, controlled by Tan Sri Lim Kang Hoo and Datuk Haris Onn Hussein, who is the brother of Defence Minister Datuk Seri Hishammuddin Hussein, bought into Duke after it completed a share swap deal worth RM325.86 million with Wira Kristal in May.

Under the deal, Ekovest issued 126.7 million new shares at RM2.57 each to owners of Wira Kristal, which comprised Lim (40%) and Haris (60%), in exchange for a 100% stake in the private outfit that controls 70% of Duke.

Ekovest (through Wira Kristal) and MRCB now own 70% and 30% stake respectively in Nuzen Corp Sdn Bhd, which in turn owns 100% of Konsortium Lebuhraya Utara-Timur (KL) Sdn Bhd (Kesturi), the concession holder of Duke.

With Datuk Salim at the helm, MRCB has a different thinking on non-controlling assets.

At Ekovest, Lim has indirect and direct stakes of 32.38% while Haris owns 20.81% via Kota Jayasama Sdn Bhd.

A planned extension will soon be underway for Duke. Construction of the second phase may start in November for a period of three years at a cost of RM1.2 billion. The additional investment plus a longer gestation period following the extension could be the reason MRCB is looking to divest its interest in Duke.

“Furthermore, the 30% interest is a non-controlling stake for MRCB. With Datuk [Mohamad]Salim at the helm, MRCB has a different thinking on non-controlling assets,” added a source.

Kesturi on Wednesday received the go-ahead from its bondholders for the issuance of new debt papers of more than RM2 billion to finance the extension of Duke.

Of the total sum, over RM800 million will be for redeeming the bonds previously issued for the first phase of Duke, while more than RM1.2 billion will be for funding  the second phase of the project.

In December 2012, the concession term for Duke was extended by another 20 years, to 2059 (from 2039 initially), as part of the agreement with the government to extend the expressway by constructing two additional links — Sri Damansara Link and Tun Razak Link.

“As such, MRCB’s proposal to dispose of its 30% stake in Duke came at the right time,” said a source.

According to executives, Duke produced some RM80 million in revenue in the first calendar year ended Dec 31, 2012.

Ekovest and MRCB are also partners in the River of Life (RoL) project via Ekovest-MRCB JV Sdn Bhd, a 60:40 joint venture between the two parties.

The JV company was appointed the project delivery partner of the RM2.2 billion Klang river rehabilitation and beautification project.

With the disposal of Duke, it raises a question if MRCB’s stake in the RoL project will be also put on the selling block.

This article first appeared in The Edge Financial Daily, on September 27, 2013.


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