Tuesday 28 May 2024
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This article first appeared in The Edge Malaysia Weekly on January 18, 2021 - January 24, 2021

THE Negeri Sembilan state government has come up with a plan, spanning the next 25 years, to give its economy a shot in the arm. As a precursor to this, the state government launched in mid-December last year Invest NS Year 2021, but it gained little traction because of the pandemic.

Datuk Mohamad Rafie Ab Malek, chairman of NS Corporation, the government agency responsible for the investment and economic affairs of Negeri Sembilan, sheds some light on the state’s ambitious plans.

“We will finalise things soon. This is our economic blueprint. [The] Negeri Sembilan state government has prepared its own master plan for the entire development until 2045. The gross development, the targeted value that we plan for the whole thing, is about RM468 billion,” Mohamad Rafie tells The Edge in an exclusive interview.

Mohamad Rafie is tight-lipped, however, on much of the plan, with many of the proposals still being firmed up and partners still being roped in.

“We have a number of players coming in … It won’t work with one single player. You see, the whole development involves a number of players,” he says.  

While several key clusters are being mooted, the one for industrial development — which is concentrated in the eastern part of the state, and spans Seremban to Port Dickson, within the Malaysia Vision Valley 2.0 — seems to be the most interesting, with part of the plans already laid out and the agency willing to share some details.

Mohamad Rafie further breaks down the MVV2.0 region into four clusters (see map), situated on a 33,227-acre site. He explains that the 2,838-acre Parcel A, on the North-South Expressway (NSE), is where a Tech Park is slated to be built; and the 8,796-acre Parcel B — what he calls a Smart County — comprises a residential development and a transit-oriented development. The Kuala Lumpur-Singapore High Speed Rail (HSR), which has been terminated, was to have passed through this area.

While the termination of the HSR is a dampener, studies are being undertaken to build an HSR in Malaysia, and there is every possibility of a rekindling of talks with Singapore.  

Then there are Parcel C, which is about 15,400 acres and slated for an aerospace and logistics hub called NS Aerospace Valley; and the 6,220-acre Parcel D, which entails the development of an integrated maritime hub and a waterfront corridor.

The 33,227 acres allotted for the four parcels are to be acquired from Sime Darby Bhd and its units, Sime Darby Plantation Bhd and Sime Darby Property Bhd.  

“We are still talking to Sime Darby. Basically, all three Sime Darby units agreed [for us] to develop the land. [So,] we already have an understanding with all the landowners. Some land is under TH Properties [Enstek],” Mohamad Rafie says.

While partners for all the four parcels have been identified, Parcel C seems to be the most intriguing (see “Can Uni Wall deliver?”).

Aerospace and logistics in Parcel C

Parcel C entails the development of an aerospace valley and a logistics hub, and is expected to do well, given its strategic location, which offers land, air and sea connectivity as well as proximity to the Kuala Lumpur International Airport, Port Klang and the NSE.

With its proximity to KLIA, NS Aerospace will be able to tap the airports customer base. In 2018, KLIA handled close to 60 million passengers and more than 700,000 tonnes of cargo and facilitated close to 400,000 aircraft movements, making it among the world’s top 25 airports in terms of size. Also in the mix is KLIA2, the world’s largest purpose-built terminal dedicated to low-cost carriers. It has a capacity for 45 million passengers.

With Port Klang and the NSE close by, the aircraft component manufacturers can export their products with ease.   

Mohamad Rafie says, “The federal government is doing the feasibility study for Parcel C (NS Aerospace). [The feasibility study] is ongoing; the whole project is being studied by the EPU (Economic Planning Unit). We are expecting to get the study by April or May this year; the EPU has started on the studies already.”

He adds that the federal government is offering tax incentives to make things more attractive to potential investors of Parcel C.

Prior to the global lockdown, he had met with many aviation and aerospace industry players and even travelled to France.

“I went to Paris to talk to potential investors … They loved the idea. You can imagine the shipping costs [they have to endure to send their parts to various locations around the world]. Having the aviation industry [consolidated] in one area (NS Aerospace), imagine how much costs we can cut.”

While the aerospace industry has seen better days, it is expected to rebound eventually, adds Mohamad Rafie.

Explaining NS Aerospace’s business model, he says: “What we [NS Corp and Uni Wall APS Holdings Bhd] as the developer are doing is we provide the buildings according to [the users’] specifications, and then they will lease the building from us … This is one of the ways to attract them, [as there is low capital outlay for them].”

NS Corp hopes to attract local players such as CTRM Sdn Bhd (formerly Composites Technology Research Malaysia), a unit of diversified DRB Hicom Bhd and UMW Aerospace Sdn Bhd, which supplies fan cases for Rolls Royce’s aircraft engines and is wholly-owned by UMW Holdings Bhd.

Other players that could be interested to shift to NS Aerospace Valley include Safran Landing Systems Malaysia Sdn Bhd in Sendayan, Negeri Sembilan, and part of French giant Safran group.

As to the revenue such an initiative can generate, Mohamad Rafie says Singapore’s Seletar Aerospace Park, which is located on less than 800 acres, generates a revenue of S$11 billion annually (RM33.5 billion).

Are the state government’s plans realistic? Recall that the original MVV2.0, which was mooted more than 10 years ago, with Sime Darby Property as the master developer, has started to take off only in recent years.

To this Mohamad Rafie says, “That was a different management, this is a new management … and there was no real master plan for the development.”

On NS Corp’s partner Uni Wall being a smallish company, Mohamad Rafie says: “There is nothing wrong with being small. Jack Ma and Alibaba [Group Holding Ltd] started out small, but look at them today … We would rather work with small companies that are capable than with giants that are not dependable.

“The commitment is important.”

Can Uni Wall deliver?

In mid-December last year, Uni Wall APS Holdings Bhd made an interesting announcement to Bursa Malaysia.

In a nutshell, Uni Wall said it “had entered into a Memorandum of Collaboration to initiate a participation and cooperation between the parties to work on the realisation and execution of works in the development of lands located in the state of Negeri Sembilan, which is styled as Malaysia Vision Valley 2.0, whereby Uni Wall [will] implement the development of certain parts of the land (approximately 16,000 acres).”

With a market capitalisation of RM578 million at last Thursday’s close of 79 sen a share, Uni Wall has set itself lofty targets by opting to be the master developer of the 16,000 acres, which make up Parcel C of the development plan of Negeri Sembilan’s state development body, NS Corp.

To put things in perspective, Parcel C involves the development of a RM150 billion aerospace valley.

“Basically, we have been in construction for more than 20 years. Development is also not new to us, but then again, 16,000 acres is huge. Even if you pass [it] to other larger players, it’s still a big project, which is why a consortium is important, and why a strong funding partner is important, especially as this master plan involves international players,”  says Uni Wall’s managing director and CEO Siow Hon Yuen.

“Uni Wall has no experience in aviation, but we are providing MRO (maintenance, repair and overhaul) operators an option to operate their factory here, near KLIA,” he adds.

While he is reluctant to divulge any names, he says he has roped in six investors for the NS Aerospace development — three developers, two funding partners that are venture capital companies, and one logistics player.

“We are raising funds, about RM4 billion to RM5 billion, through three options — banks, venture capitalists and from the market. Most venture capital outfits have lots of cash now, so the cost of funds is cheap, and we are dealing in land — 16,000 acres of land — a tangible investment.

“If we raise RM4 billion for [the acquisition of the] land and infra, in the worst-case scenario, we will still have assets worth RM2 billion or more even ... The risks are not that high,” he says optimistically.

Uni Wall, which makes and installs building facades, was listed on the LEAP Market of Bursa Malaysia in mid-January 2019. Siow admits to having floated the company’s shares with this RM150 billion project in mind.

“We will announce it (JV partners who will facilitate the development taking place) soon. The consortium will consist of funds, JV partners who are developers, as well as end-users. I suppose we are confident … We place high hopes on this development,” he says.

On how the JV between Uni Wall and NS Corp came about, Siow explains: “We approached the state government. Of course, in terms of ideas, all parties contributed, [but] we are responsible for bringing in funds, buying the land and developing the land.”

On how much the acquisition of the land from Sime Darby will set Uni Wall back, Siow merely says, “It will be substantial.”

He controls 87.65% of Uni Wall’s stock.

If the plan does take off, Uni Wall will be a very different animal.

Asked about the internal rate of return or IRR, Siow says, “Basically, for this type of development, 15 years to 20 years ... The returns, conservatively put, will be 30% to 40% gross profit.”

For its six months ended June 2020, Uni Wall reported a net profit of RM589,000 from RM7.39 million in revenue. For the corresponding period a year ago, it registered a net profit of RM5.38 million on the back of RM19.38 million in revenue.

As at end-June last year, Uni Wall had fixed deposits with licensed banks amounting to RM5.5 million, cash and bank balances of RM2.02 million, and retained earnings of RM18.24 million. During the period in review, the company had long-term debt commitments of RM7.05 million and short-term borrowings of RM1.21 million, pushing it into a net debt position.

“When we start getting the infra done, it will be about three years from now to complete everything. Three years from now, things would be better,” Siow says.

On when the recurring income from the leasing of the facilities will kick in, he adds, “Based on our studies, actually in year five. Our cash flow will be negative before that, which is why the funding partners are important. After five years, with the end-users and development in place, we will see positive cash flow, positive income coming in,” he sums up.

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