This article first appeared in The Edge Malaysia Weekly on May 3, 2021 - May 9, 2021
EKOVEST Bhd is vastly different now compared with when Tan Sri Lim Keng Cheng (KC) took over as managing director 10 years ago in May 2011.
The construction giant has a 60% interest in Konsortium Lebuhraya Utara-Timur (KL) Sdn Bhd, which operates the Duta-Ulu Kelang Expressway (Duke) comprising Duke 1, 2 and 3 — three intra-city toll highway concessions in the Klang Valley. While Duke 1 and 2 are operational, Duke 3 is at the tail end of construction.
The group has also undertaken the River of Life project aimed at beautifying and cleaning up the polluted rivers that run through the capital city.
Influenced by his late father Lim Seong Hai, who was a contractor, KC is passionate about building highways to shorten people’s commuting time from one end of the city to the other.
Having grown up in Gombak, Selangor, KC understands the frustration of being stuck in bad traffic jams. Hence he is happy to be a part of the team constructing the Duke highways.
As managing director, KC takes pride in these achievements. However, something that the investing public — perhaps KC included — did not anticipate was the slew of related-party transactions (RPT) that Ekovest’s board has proposed to minority shareholders in recent years.
Ekovest bought into durian planter PLS Plantations Bhd, and controls a 73% stake. It is in the midst of buying 38.96ha of land in Pulai, Johor, for RM944.62 million from Iskandar Waterfront Holdings Sdn Bhd (IWH). The price tag has been revised downwards from RM1.11 billion previously. According to KC, the price revision was made on the advice of the company’s independent directors.
It is worth noting that the proposed land acquisition was aborted in March. Will the revision help to win minority shareholders’ approval? It would be something to watch out for.
On top of that, Ekovest has been roped in to participate in the massive Bandar Malaysia development project at the former airbase in Sungai Besi.
IWH is offering Ekovest a 40% stake in IWH-CREC Sdn Bhd for RM1.3 billion. The so-called crown jewel of IWH-CREC is its 60% stake in the Bandar Malaysia project.
It is an RPT because IWH’s 63.13% controlling shareholder, Credence Resources Sdn Bhd, is owned by Tan Sri Lim Kang Hoo (90% equity interest), the executive chairman of Ekovest, while his sister Datuk Lim Hoe and nephew KC hold 5% each. Johor state’s Kumpulan Prasarana Rakyat Johor Sdn Bhd owns the remaining 36.87% in IWH.
The downward trend in Ekovest’s share price is an indication of how the investing fraternity feels about the proposed RPTs. The stock price has been drifting downwards from the peak of around RM1.40 in 2017 to a low of 42 sen about a year ago. Many stocks on Bursa Malaysia have rebounded from last year’s troughs, but the same cannot be said about Ekovest.
When asked about his opinion on the RPTs, KC tells The Edge that it was the shareholders’ decision whether to proceed or not, without elaborating on the merits and demerits of those deals. But he reiterated that he will always stand by the advisers’ advice.
About a week ago, on April 23, Lim Seong Hai Holdings Sdn Bhd (LSH) — the investment vehicle of KC and his three siblings, Datuk Lim Keng Guan, Lim Keng Hun and Lim Pak Lian — trimmed its stake in Ekovest to slightly below 5%. As a result, Bursa Malaysia defined the investment vehicle as ceasing to be a substantial shareholder after it sold 20.08 million shares or 0.74%. LSH still has a 4.02% stake.
Kang Hoo, meanwhile, holds a 30.8% equity interest in Ekovest.
The share sale, although not sizeable, has caught the attention of market watchers and punters. Some quarters perceive it as evidence that KC might have other plans given rumours that he and his uncle Kang Hoo — the executive chairman and single largest shareholder of Ekovest — are not seeing eye to eye.
A construction industry source tells The Edge that there is a feud brewing among members of the Lim family. At opposing ends are Kang Hoo, a businessman with strong ties in Johor, and KC. KC’s late father Seong Hai and Kang Hoo were brothers.
“I don’t know what the fight is about, but I am quite certain there is some dispute going on,” the source says.
Another source, a construction industry veteran familiar with Ekovest, says the feud between Kang Hoo and KC is “an open secret”. He attributes the current success of Ekovest to the nephew. “He has worked hard to take Ekovest to where it is now, but how long he will stay is a question mark.”
As market talk of a rift between the two heightened, The Edge met with KC to clarify the situation.
“It’s not true,” KC says, when asked about the feud. He goes on to explain that LHS sold shares simply because it needed cash for its money-lending business as some loans granted to “friendly parties” have not been able to get repayments as scheduled.
“We had given [out] a short-term loan of six months, but they (the borrowers) didn’t come back; they have some ongoing business … we (LHS) also don’t like to sell [out of Ekovest] at this price, but this is purely a business decision,” he explains.
While it is still unclear if KC and Kang Hoo are at loggerheads, Ekovest’s earnings have seen strong growth over the past 10 years.It recorded a net profit of RM10.09 million on revenue of RM217.7 million for the financial year ended June 30, 2010 (FY2010).
For FY2020, Ekovest posted a net profit of RM47 million on revenue of RM1.26 billion. It is worth noting that the group’s net profit between FY2016 and FY2019 was above RM110 million, hitting RM155 million in FY2016.
For the six months ended Dec 31, 2020, Ekovest reported a lower net profit of RM18.51 million from RM672.72 million in revenue. For the corresponding period a year earlier, the company chalked up a net profit of RM92.35 million from RM731.11 million in revenue.
Moving forward, will Ekovest continue to remain on this growth path? The RPTs will have an impact on this.
Speaking his mind
Ekovest Bhd has blossomed over the years to have three highways and a relatively strong construction business under its belt. However, the company’s headquarters is still in Gombak, a memorable place to its controlling shareholders, the Lim family, as it is where the older generation used to live.
Ekovest managing director Tan Sri Lim Keng Cheng (KC) has a lot to share about Gombak, which he calls his kampung, being the place where he grew up and went to school.
KC walked into his office shortly before 11am, ready to meet The Edge. He looked fresh although he had worked until 3am the night before to conduct his regular inspection of the construction sites. Hence, it is not hard to understand why many in the industry attribute Ekovest’s current accomplishments to him, despite his uncle Tan Sri Lim Kang Hoo being the company’s executive chairman.
Market talk is rife with a rift building up between KC and Kang Hoo. And the fact that KC and his siblings’ holding company, Lim Seong Hai Holdings Sdn Bhd, recently sold down its shareholding in Ekovest sparked even more rumours. However, KC denies that there is any feud, saying that it is not in his nature to fight with others.
Here are excerpts from the interview.
The Edge: Tan Sri, you are perceived as being key to Ekovest. But now, you have sold some shares. People are saying that there is some friction between you and Tan Sri Lim Kang Hoo (hence the selldown of Ekovest).
Tan Sri Lim Keng Cheng: It is not true. Lim Seong Hai Holdings is a diversified company. It also has a money lending licence. We lend to friendly parties, so we had given a short-term loan of six months, but they [the borrower] didn’t come back [and pay]. We [Lim Seong Hai Holdings] also don’t like to sell at this [low] price, but it was purely a business decision. People can speculate, but there is no fight. Even if people want to fight with me, I will not fight.
So, there is no friction … the market talk is very wrong?
As far as KC Lim [his moniker] is concerned, I have never fought with anyone. I still do my job … unless someone wants to throw me out. It’s the same thing when I was at Knusford [Bhd]. I was doing very well, but the shareholders asked me to go to Ekovest, so I went to Ekovest.
Even in IWH [Iskandar Waterfront Holdings Sdn Bhd, in which 63% is held by Credence Resources Sdn Bhd], I have 5% in Credence, but you all [the press] always miss out my name [as a shareholder]. But I keep quiet … or maybe somebody wants to hide my name, I don’t know (laughs).
Then, I also have to tell you that Kang Hoo’s children have grown up, maybe they may want to do something, but I don’t know … as far as I am concerned, I didn’t fight with anyone. I never gaduh with anybody, [be it] my relatives, outsiders.
A lot of people have asked me this question. To be very frank, I don’t know what their [Kang Hoo’s family’s] idea is, whether they want me to stay or not to stay. As far as I am concerned, I am a professional. I have an obligation to the public. When I work for a company, I put my heart and soul and effort to make sure the company survives. I don’t mix shareholder matters at the board level. I am very clear when it comes to shareholder matters. Of course, I can be voted out.
Tan Sri, looking at Ekovest over the past five years, it has changed a lot.
You can see that trend when I was at Knusford as well, it changed a lot. Sometimes, if the shareholders want someone [me] to be the CEO, then … I have no choice. This is why I cannot answer you. Today, I may say yes, I will be the MD [at Ekovest]. Then tomorrow, the shareholders may say otherwise.
When was the last time you saw Tan Sri Lim Kang Hoo?
We always meet at board meetings. We always have board meetings.
How do you see the diversification of Ekovest? It bought into PLS, the durian plantation … and there is also the Bandar Malaysia project.
These are related-party transactions. For me, I look at the numbers. If it’s okay, then we proceed.
How did the idea come about for Ekovest to go into durian plantations?
Ekovest has an executive chairman [Tan Sri Lim Kang Hoo], I’m not the leader. Lim Chen Thai [Kang Hoo’s son] is also an executive director. I’m only the MD, so I don’t have the full say.
Is there any reason for the market talk on friction between yourself and Tan Sri Lim Kang Hoo, or is it just cakap kosong?
It’s just cakap kosong … people can assume things, but I will not fight. It’s not in my nature, KC Lim doesn’t fight. If he [Kang Hoo] wants anything, I will let go. If he wants my shares, I will also let go. I will not fight, but I will diligently do my job [as managing director].
Is Tan Sri Lim Kang Hoo upset with you?
I don’t know (laughs). Based on the results, there is no reason for him to be upset with me. The track record shows … when I became CEO of Knusford until I left, the company’s results were flying high. Even when I joined Ekovest, until now, the results are good.
How has your relationship with your uncle (Kang Hoo) been?
No problem, we don’t mix the family with business. I still go for family functions. Business and family are separate, we don’t mix [the two].
As the MD of Ekovest, what do you think about diversifications?
Ask the chairman that … the directive to buy PLS, to buy Bandar Malaysia. Our board is very direct, very blunt, very open, even if we have differences, we don’t let the outside [of the family and board] know there is a difference [of opinion]. We believe a company is like a ship, you cannot open [dismantle] it.
If you want to talk about diversification, there is good and bad. There is never a perfect school of thought.
For Iskandar Waterfront Holdings, it looks like there could be some financial issues, because Bandar Malaysia did not take off as planned. On top of that, because of the slowdown in the Johor property market, land sales are down.
At IWH, I am passive. I am executive director there and I am involved in infrastructure. At Ekovest, I am the full-time MD. Any major decision is made by the shareholders.
Recently, Ekovest revised its proposal to buy land from IWH (to acquire 38.96ha in Pulai, Johor, for RM944.62 million, where the initial price was RM1.11 billion but is now being offered at RM944.62 million after the proposal fell through as minority shareholders turned it down in 2018).
I know where you are coming from.
Do you think it’s a good deal?
I stand by the adviser … like what I told you, we discussed it in depth at the board meeting. Of course, ultimately, the shareholder wanted to go for it.
The deal fell through initially, then the price was fine-tuned.
For your information, that decision was made by the independent directors. I have a vested interest — I am MD here [at Ekovest] and I am an ED on that side [IWH] — I cannot decide … I abstained [from voting].
Do you have an opinion on the deal?
I don’t know … leave it to the shareholders.
So, you would like to stay on at Ekovest.
Yes, executing the shareholders’ mandate. But if the shareholder doesn’t want me, then I have no choice. It has happened before at Knusford … the shareholder wanted me to move to Ekovest, so I moved to Ekovest.
Tan Sri, as the MD of Ekovest, what do you have to say to shareholders on the future direction of the company?
I have an executive chairman on top. You understand?
So, he sets the direction?
Yes. I have an executive chairman on top. So, I cannot set the direction 100%, you understand.
So, the share sale by Lim Seong Hai Holdings was a one-off?
I don’t know. You can see Lim Seong Hai Holdings’ [shareholding in Ekovest] reached 8% before it came down. It has been zero before as well. Lim Seong Hai Holdings may buy back Ekovest shares if the friendly party pays back [the debt].
