This article first appeared in The Edge Financial Daily on April 14, 2017 - April 20, 2017
KUALA LUMPUR: Anzo Holdings Bhd, formerly Harvest Court Industries Bhd, is close to bagging a contract worth up to RM1.21 billion from KL Northgate Sdn Bhd to build several components of an 18-acre (7.28ha) mixed-use commercial development that includes a five-storey shopping mall in Selayang here.
In a filing with Bursa Malaysia yesterday, Anzo said its wholly-owned unit Harvest Court Construction Sdn Bhd (HCCSB) has received a letter of intent (LoI) from KL Northgate to undertake construction works on the shopping mall — which has an estimated gross development value of RM3.6 billion — as well as car parks within the proposed development dubbed “Paragon@KL Northgate”.
“The contract work for Paragon@KL Northgate will help the loss-making Anzo return to the black by the fourth financial quarter ending March 31, 2018 (4QFY18),” Anzo managing director Datuk Eddie Chai told a media briefing yesterday.
“We want the shareholders to be confident about our plans down the road,” he said.
Anzo has been loss-making since FY12. For its nine-month period ended Dec 31, 2016, Anzo narrowed its net loss to RM5.9 million from RM7.01 million a year ago.
A check on the Companies Commission of Malaysia website reveals that Chai holds a 24.5% stake in the privately held KL Northgate, which is the main developer for the Paragon@KL Northgate project. Other major shareholders of the company are Transcend Development Sdn Bhd and Curahan Yakin Sdn Bhd.
Going forward, Chai said Anzo expects its major revenue contributor to come from its construction arm, from timber business now. For 4QFY16, Anzo’s timber business contributed 82.25% to the group’s revenue.
Under the LoI, Anzo will work with MCC Oversea (M) Sdn Bhd — a subsidiary of China’s Metallurgical Corp of China Ltd — to jointly undertake the proposed contract work, which is expected to be completed by 2020.
Also included in the LoI is a three-acre hot spring near the site, which will be redeveloped by Anzo in the next 18 months to become a landmark tourist attraction under an agreement between KL Northgate and the local authorities, said Chai.
MCC Oversea was involved in the design of the shopping mall together with KL Northgate. Following the LoI, MCC Oversea will also partake in the construction, as well as provide financing for Anzo to undertake the contract work.
In its filing with Bursa, Anzo said the LoI is not legally binding, but noted that KL Northgate has expressed its intention to award the contract to HCCSB, subject to finalisation of final contract pricing and agreement of terms and conditions.
“The time frame for finalisation of the contract document and final contract pricing is estimated to be within three months,” it added.
KL Northgate director Ng Yin Meng said other components of the mixed development include an indoor water theme park, a virtual reality game park, an ice skating rink, two blocks of residential towers and two hotels, but contract work on these components will only be awarded later.
Ng said it has attracted 30% take-up for the mall to date. “We understand that the market is soft, but this project (Paragon@KL Northgate) is looking at three years down the line, and we expect retail and commercial property market to pick up again.”
Anzo’s share price has risen 130.8% since March 2017 to close at 60 sen yesterday, with a market capitalisation of RM163.69 million. It received an unusual market activity query from Bursa Malaysia at end-March, to which the company has said it was not aware of the reasons for the jump in its share price.