Wednesday, 10 October 2012

About Benalec, AMedia, Pesona (Mithril) ....

Dated Sept 2012 …

Benalec, which the rights to reclaim land at the southern tip of Johor is negotiating with several foreign tank farm operators to sell it the first reclaimed parcel of 250 acres.

The company is confident of closing a deal within the next few months from Sept 2012 and expects to commence reclamation works at Tanjung Piai, Johor as early as the second half of 2013.

The tank farm operators are from the Middle East, Europe and China. Some of them are already operating at the JurongIndustrial Park in Singapore, but they are looking for more land to expand their capacity.
The company expects earnings from the reclamation works to be reflected in its earnings for the financial year ending June 30, 2014.

The 250 acre parcel is just a small portion of the thousands of acres of reclaimable land Benalec is entitled to in Johor, but being the first, its success is crucial for the company to market the entire project on the international stage.

It had signed two development agreements with the Johor government to reclaim 3485 acres in Tanjung Piai and another 1760 acres along the shoreline of Pengerang, also in Johor.

Its 70% owned units will bear all costs of reclaiming the two concession areas. The two units will also responsible for finding prospective purchasers for the project land. The Johor government will be entitled to 3% of the proceeds from any land sale. It intends to finance the works with internal funds, borrowings and proceeds from land sale.

The DAs essentially allow Benalec’s 70% owned Spektrum Kukuh Sdn Bhd and Spektrum Kukuh Sdn Bhd, to reclaim land in the two areas and obtain a lease of 99 years. In return, the Johor government would get an undisclosed amount of upfrom premium plus 3% of the gross sales of the net saleable area of the reclaimed land. This is to ensure that the state government rides the upside potential of the valuation of the land.

Johor has several property projects catering for the oil and gas industry. In the face of competition, Benalec’s strategy is to sell the plots of Tanjung Piai to international tank farm operators, not only for storage of crude oil but also edible oil. As for the plots in Pengerang, it hopes to sell them to fabricators.
The company could carve out a niche amid the ongoing developments in the 22000 acre Refinery and Petrochemical Integrated Development (RAPID) complex, which is also in Pengerang. RAPID is an initiative led by Petronas, there is a possibility of Benalec’s Pengerang project being included in the RAPID master plan.

There is interest in the Benalec plots because both the entitlement areas (Tanjung Piai and Pengerang) have good sea frontage and will be accessible to sea transport. The company plans to build a jetty at Tanjung Piai and a port at Pengerang upon completion of the reclamation works.

In terms of the funding the reclamation works, the company has raised rm100 million from a placement exercise and is looking to borrow another rm100 million. Benalex is presently net cash.
Benalec plans to sell some reclaimed parcels in Klebang, Melaka to raise funds. The company still has 300 acres of reclaimed land there that is available for sale. It also has the rights to reclaim another 500 acres along the Klebang shore, where the Boon Siew group is planning a lifestyle and medical city development.
Benalec had been holding back the sale of its reclaimed land in Melaka while approving for a new highway to be built there.

Benalec’s major shareholder and MD Datuk Vincent Leaw has been acquiring shares in the open market, raising his family’s stake to 54.41% as at Sept 12, 2012. The company has been buying back its own shares.

It is able to manufacture land and sell it at a margin.

To recap in March 2012 had sold two plots of reclaimed land in Kota Laksamana for rm45 psf and another deal done in June 2011 for rm28 psf. The total sale consideration for the 395175 sq ft leasehold land in Kota Laksamana was rm17.78 million while the price of the 1627405 sq ft land was rm45.57 million.
Sources say that Benalec has secured 2400 acres for land reclamation projects in Melaka. Of these, the group has reclaimed 1500 acres which have either been paid for in cash by clients or sold to the third party. In Melaka. Benalec still has roughly 900 acres more to go and it has been bidding for more land reclamation projects in Melaka, Johor and Penang.

In addition to land reclamation, it – which lists marine engineering and construction as its niche – has ventured into the construction of an oil and gas terminal in Tanjung Piai, Johor. However Benalec is not interested in owing the operating the terminal itself, or even in a JV with another party. Although it still holds a stake in the JV with Rotary, the stake will be small.

Apart from concession to reclaim 2485 acres in Tanjung piai, it has also been given the right to reclaim 1760 acres of land in Pengerang, which has been slated to become the region’s OG& refining hub with the planned investments by Petronas.and Dialog.

The Land Reclamation Industry …
The cost for land reclamation projects is high due to the large amount of raw materials needed, use of expensive and sophisticated heavy machineries, labour force, time to complete and most importantly, the feasibility studies and engineering designs that are unique to each site.

Since 2006, the sector had grown by a resounding 68 per cent, largely due to the funds provided by the government under the 9th Malaysia plan.

Having various drivers to push the industry was crucial as this meant the industry was not dependent on any one particular sector. The land reclamation industry can be a beneficiary of the oil and gas sector, port and logistics sector, construction sector, property sector and so forth.
Among the major players in land reclamation locally are Benalec Holdings Bhd, Muhibbah Engineering Bhd and Galactic Maritime (M) Sdn Bhd.

The good thing about this industry is that it is a very niche business and not many companies have that specialty. Another reason why the prospects of land reclaimation companies will remain bright over the long-term is that some of them receive land parcels as partial payment of the reclamation job.

Benalec, for example, owns several parcels of land in Malacca in return for the reclamation works it did there. Having land in return can be beneficial, especially so if the value increases.
The order book of privately-held Galactic Maritime currently stands at about RM220 million, comprising of reclamation projects around the Iskandar economic region, including the Nusajaya waterfront development.
The company is also involved in the upgrading of ports, harbour and navigational waterways along the Tebrau Strait, Port Dickson, Klebang in Malacca, Pulau Indah near Klang and Jambatan PIAI in Johor.
Since 2003, Galactic Maritime has been involved in marine construction works in China's southeast coastal areas, with the successful completion of projects in Zhejiang,Fujian and Guangdong.

In Oct 2012 it announced a proposed bonus issue of 250.80 million new shares on a one-for-one basis and also a proposed issue of 250.80 million free warrants on the basis of one warrant for every share held.
The steep fall in its share price (08 - 09 Oct 2012) could raise concerns about the exercising of the warrants. According to the Oct 5 2012 announcement, the indicative exercise price of the warrants was assumed at 51.1 sen per warrant, which was the theoretical ex-bonus price, calculated based on the five-day volume weighted average market price of the shares up to and including Oct 4 2012 of RM1.021.

In June 2012 Asia Media Group Bhdhad fixed the issue price for the final tranche of the private placement shares at 38.5 sen each for the tranche allocation of 11.4 million shares.
In 2011 it had placed out 35% of the paid-up in 2011. The private placements entail the issuance of up to 79.80 million new shares to identified Bumiputera investors. The funds from which will also be directed towards building DTDB infra. Along with the CASP-I license, AMedia was also awarded network service provider and network facilities provider licenses.

Asia Media Group Bhd, the country's largest transit-television network operator, plans to launch a terrestrial digital TV station by as early as the first quarter of 2012.
It has allocated as much as RM50 million in capital expenditure in 2013 to help it with the launch in the Klang Valley.

Its first step in the plan to launch the terrestrial digital TV station is to launch the "out-of-home service". Out-of-home service means that people who use public transport such as the Rapid buses and the city's rail service will be able to watch live TV.

Currently (Aug 2012), Asia Media operates transit TV services for the city buses, but most of the feed are pre-recorded, with the content coming from third parties.

Asia Media is expecting to bring in as much as RM50 million in 2012 from advertisements alone.

Most of the shows will be in English and Bahasa Malaysia, with content coming directly from Asia Media.
The company also has a licence to operate a radio network. The radio network will focus mainly on the Chinese market.

Apart from the cost, finding the right content is the major drawback, pulling the company away from this path.

For the nine months ended August 30 2011, the firm's pre-tax profit stood at RM11.74 million versus RM8.13 million in the same period a year ago.

It plans to expand its reach onto trains and taxis once it fully rolls out its DTTB system
by end of 2012.

It controls 73% of the market in its business segment with its major clients being Syariakt Prasarana Negara Bhd, which operates RapidKL and Rapid Penang busess and trains and Konsortium Transnasional Bhd which runs the interstate bus routes.

It is optimistic about renewing its tie up with Prasarana when its contract with the latter expires at end of 2013. It holds a license as content application service provider.

A potential new revenue stream being considered by AMedia is the leasing of its excess capacity to other players or those who serve the hotel segment.

Its Strength …
It belongs to a small group of companies that own free to air (FTA) broadcasting licenses and is essentially able to provide services similar to those offered by RTM and Media Prima.

Certainly, this license has enhanced the company’s appeal for it has attracted other players in the media space. Rumors had it in June 2011 that the company was in talks with Star on a possible takeover but its CEO denied.

AMedia has not have any discussions with Star but they do want to explore all the opportunities it has. A few entities, local and international, have shown interest in taking up a stake in AMedia in July 2011 but things are at a preliminary stage.

Talks were also ongoing with a number of investors, including local media groups, on the purchase of a 10% stake in the company in July 2011.

So why would local media company want a stake in Amedia.

Apart from its huge margins, the company’s license to provide FTA broadcasting services offers an avenue for bigger media players eyeing a piece of the electronic media market.

In 2010, the MCMC awarded AMedia a content application service provider (CASP-i) license, which enables it to enter the digital television, FTA television and radio broadcasting industry.
AMedia is one the few companies in Malaysiathat are permitted to offer broadcasting services and facilities.A full CASP-I license allows the company to operate nationwide 24 hour non subscription broadcasting, subscription broadcasting and terrestrial radio broascasting services.
Currently (July 2011), only Media Prima and RTM hold FTA broadcasting licenses.

With CASP-I, AMedia has the right to provide broadcasting services within the frequency in Malaysiaand to operate multiple TV, radio and data channels.

The company has its eye on digital terrestrial television broadcasting– a service to deliver real time as opposed to pre recorded, content on mobile screens.

However, to realize the full potential of services that the CASP-I license enables the company to offer, it needs substantial capex and foothold in the industry. Effectively, AMEdia has to compete with established players like Astro and Media Prima.

Its CEO said that it has no immediate plan to venture into digital television. Furthermore, expanding its DTDB segment would absorb most of its capex in the years ahead.

AMedia is part of the ETP, under which it plans to invest rm500 million over the next 10 years from 2011 to provide live broadcasting and grow its network of mobile broadcasting on public transport.

This will be part of its project to deploy digital broadcasting in stages. It first wants full coverage of the Klang Valleyby the end of 2011.

Asia Media, Malaysia’a largest transit TV operator, offered a good growth story in a small but fast-growing media segment. Another key attraction is the group’s exposure to the public transportation upgrade in the KlangValley which will allow it to expand its services to the LRT and MRT systems.
It could be catalysed by success in securing the licence to operate on the LRT. AsiaMedia provides investors with an alternative exposure to growing media segments other than FTA TV and newspaper.

Pesona Metro (Mithril)
Bursa Malaysia Securities Bhd has approved the listing and quotation of Pesona Metro Holdings Bhd's 463.82 million shares which will replace the delisted Mithril Bhd. The proposed restructuring scheme involved the issuance of new Pesona Metro shares, a five-into-one share capital reduction of Mithril and the consolidation of Mithril shares. After the consolidation of the Mithril shares, they would be exchanged for Pesona Metro shares.

To recap, Mithril completed its restructuring by third quarter 2012, after which its listing status will be transferred to a new company. The result: Mithril will become a construction counter.
It had proposed disposal of 29 parcels of commercial office space, and an office building in Sabahfor RM43.2mil. This should be the last leg of an asset disposal process to pull the building materials company out of financial distress.

Mithril had earlier signed a heads of agreement with the promoters of Pesona Metro Sdn Bhd, Wie Hock Beng and Chak May Teng to regularise the financial condition of the company.

It is understood that Hock Beng is the brother of construction and property firm Putrajaya Perdana Bhd's chief executive officer Wie Hock Kiong. It is also understood that Hock Kiong may join Pesona Metro, but this remains unsubstantiated.

The proposed restructuring scheme includes the acquisition of Mithril's entire equity by a newly-incorporated company (newco) for RM96mil, satisfied by the issuance of 384 million shares in the newco at par of 25 sen per share to the promoters and/or their nominee after a capital reduction and consolidation exercise.
Mithril's listing status on the Main Market will then be transferred to the newco.

Pesona Metro, which proposed to carry out the exercise, reportedly has a construction order book of around RM700mil.

Some of the projects completed by Pesona include the beautification and rehabilitation of Sungai Melaka and a residential condominium project in Jalan Bukit Pantai, Kuala Lumpur.

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