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This article first appeared in The Edge Malaysia Weekly, on November 30 - December 6, 2015.


STEEL maker Tan Sri William Cheng seems to be on an asset divestment trail.

Ayer Keroh Resort Sdn Bhd, a company linked to Cheng, is looking for a buyer for its Tiara Melaka Golf & Country Club, sources say.

It is learnt that the 27-hole golf course and clubhouse on some 336 acres in Mukim Bukit Katil may fetch as much as RM200 million.

One source says the land is attractive because the stop in Melaka for the high-speed rail between Kuala Lumpur and Singapore will be in Ayer Keroh near the golf course.

Of the 336 acres, only about 310 acres may form part of the sale as some bungalows have been built on a portion of the land, according to parties familiar with the matter.

If the land is sold, it would be the third known tract that Cheng has parted with through his listed or unlisted vehicles this year.

Just two weeks ago, The Edge learnt that Cheng’s company, Andalas Development Sdn Bhd, sold 296 acres in Bandar Mahkota Banting in the district of Kuala Langat, Selangor, to Island Circle Development (M) Sdn Bhd for RM110 million. Andalas was once a subsidiary of Amsteel Corp Bhd, which was delisted from Bursa Malaysia in October 2007.

Meanwhile, Lion Diversified Holdings Bhd told Bursa Malaysia on Nov 3 that it was planning to sell a 156.66-acre freehold agricultural tract in Tanjong Duabelas, Kuala Langat, to KLC Agro Sdn Bhd for RM36.5 million. Lion Diversified said it would gain as much as RM19.8 million from the disposal for the financial year ending June 30, 2016. It added that proceeds from the sale would be used as working capital and to repay RM20 million in borrowings.

Details of the planned sale of the golf course remain sketchy as The Edge was not able to reach any officials for comment. Sources say the Tiara Melaka Golf & Country Club is being held by a privately owned company and does not belong to any of the listed companies under the Lion Group.

Considering that the current market conditions are not conducive for vendors, the sale of assets by Cheng has stirred speculation.

While Cheng is busy expanding and revamping his retail business, Parkson Holdings Bhd, amid the weak consumer spending environment, the tycoon is facing a tougher challenge at his steel mill in Banting.

He is still fighting hard to obtain protection for the hot-rolled coil (HRC) segment in the local steel industry. Last Monday, Megasteel Sdn Bhd, in which Lion Corp Bhd has a 78.9% stake, issued a statement saying that as the country’s sole HRC producer, it has a right to seek trade remedies against the import of HRC.

“The petition seeks to provide an equitable and level playing field for local producers of HRC,” it added. 

The influx of cheap imported HRC from China has made it difficult for Megasteel to compete. Its ballooning accumulated losses of RM1.53 billion as at end-June 2014 is evidence of the tough operating environment in the steel industry.

In February, the government imposed anti-dumping duties on imported HRC from China and Indonesia for five years. But in its annual report, Lion Corp said the low anti-dumping duty rates “were unable to effectively deter cheap imports”.

The bleeding in Megasteel has dragged down Lion Corp and Lion Diversified, which owns a 6.93% stake in Lion Corp (fundamental: 0; valuation: 0).

Lion Corp’s auditors Messrs Ong Boon Bah & Co issued a disclaimer of opinion on the group’s financial statement for the financial year ended June 30, 2015 (FY2015).

The auditors said Lion Corp’s ability to continue as a going concern is mainly dependent on further protection from the relevant authorities, successful negotiations with lenders for the renewal or extension of repayment of borrowings, its ability to obtain new sources of financing, the successful execution of its cost reduction measures, and the ability of the group to comply with the terms of its proposed restructuring scheme to ensure no defaults.

The auditors cautioned that should Lion Corp fail to achieve this, it may not be able to continue to operate as a going concern and adjustments would have to be made to write down the carrying values of the group’s assets to their recoverable amounts.

Meanwhile, Lion Diversified’s (fundamental: 0.40; valuation: 0.90) auditors Ernst & Young issued a qualified opinion on its FY2015 financial statement relating to the group’s freight services. The auditors also highlighted the group’s going concern ability, credit risk and recoverability of debt from its major subsidiary, Megasteel.

Lion Diversified recently made an announcement to Bursa that it had defaulted on its loan amounting to some RM35 million, which also gave rise to a cross default of RM116.9 million. The company attributed the default to the challenging steel operating environment as a result of rampant imports of steel products at dumping prices as well as the weakening ringgit. “This has caused Lion Diversified to suffer losses for several years and its inability to meet the payment of the bonds,” it said.

Going back to Cheng’s selling spree, it is not known how he will utilise the money from the sale of his privately held assets.

Tiara Melaka Golf & Country Club has been operational since 1996. Its maximum allowable membership is 3,500.

The golf course is operated by Hy-Line Bhd. The company has an agreement with Ayer Keroh Resort to lease part of the 336-acre tract and club facilities for a total of 96 years, divided into three 30-year terms and a final term of six years. Unless terminated earlier, the lease will expire in 2089.

The Edge understands that the club’s members are allowed to use the facilities but do not have any rights over its assets.

Based on the latest financial numbers available on the Companies Commission of Malaysia’s website, Ayer Keroh Resort posted a net profit of RM60.7 million in the financial year ended June 30, 2014. The company had an accumulated profit of RM313.31 million and total liabilities of RM53.17 million, of which RM53 million was current.

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