TRC Synergy Bhd and Ahmad Zaki Resources Bhd (AZRB) are understood to be the remaining candidates vying to buy UEM Builders Sdn Bhd — the construction arm of UEM Group Bhd —sources say.
Other companies, such as Malaysian Resources Corp Bhd and a private company linked to former finance minister Tun Daim Zainuddin, are no longer in the competition, both disqualified from the bidding exercise.
But it is not known at what price UEM Group is selling its construction division. “The proposed sale generated considerable interest among the bumiputera construction companies but only a couple are left now in the race. More importantly, UEM is a step closer to disposing of the unit — that is what matters,” a source says.
Attempts to contact AZRB managing director Datuk Wan Zakariah Wan Muda — whose brother Datuk Seri Wan Zaki Wan Muda’s investment vehicle Zaki Holdings (M) Sdn Bhd holds a 59.6% stake in AZRB — and TSR Synergy executive chairman Datuk Seri Sufri Mohd Zin for comments were unsuccessful.
UEM Group, too, declined to reveal any details of the bidding.
An industry player says UEM Builders has not fared well financially, although it has undertaken a whole host of jobs both at home and abroad.
Checks with the Companies Commission of Malaysia reveal that UEM Builders posted an after-tax profit of RM38.4 million on revenue of RM2.4 billion in its financial year ended Dec 31, 2013 (FY2013).
On its balance sheet, current assets stood at almost RM2 billion while non-current assets amounted to about RM246.3 million. Short-term debt was at RM1.5 billion while long-term borrowings were RM35.2 million. The company had negative reserves of RM248.3 million as at Dec 31, 2013.
According to industry players UEM Builders’ order book stands at about RM3.2 billion, which is much smaller than in 2012 when the company had jobs worth RM6 billion to RM7 billion in hand.
Among the major jobs the company is understood to be eyeing is the Sabah portion of the RM27 billion Pan-Borneo Highway while its parent is said to be looking at the multibillion-ringgit Kuala Lumpur-Singapore high-speed railway project.
UEM Builders used to be known as Intria Bhd and was part of the Renong group. It faltered under the weight of the 1997/98 Asian financial crisis.
The company hogged the limelight when the joint venture it formed with Bina Puri Holdings Bhd was blamed for the delay in the opening of low-cost carrier terminal klia2. But the JV defended itself by saying variations in the design of the main terminal building had hindered progress.
UEM Builders has a long list of credentials, having built the North-South Expressway, Second Penang Bridge, Malaysia-Singapore Second Crossing, Kuala Lumpur LRT System 2, National Sports Complex, Kuala Lumpur International Airport Satellite A building and the electrified double-track railway between Rawang and Ipoh, among others.
The company also has an established global presence, having done work in India, Qatar, Saudi Arabia, Indonesia, the Philippines, Singapore and Brunei, among others. Some of its more demanding jobs include the Salwa International Highway in Qatar as well as more than 1,000km of highways in India. In Brunei, UEM Builders constructed 4,000 houses in Mengkubau, Kampung Mentiri, Bandar Seri Begawan.
How TRC Synergy (fundamental: 1.15; valuation: 1.40) and AZRB (fundamental: 0.35; valuation: 1.40) came into the bidding fray is not known. Nevertheless they are regarded as successful bumiputera-owned construction outfits.
In its FY2014 ended Dec 31, AZRB posted a net profit of RM12.7 million on revenue of RM655.5 million. As at end-2014, it had a cash balance of RM131.9 million while its long-term and short-term borrowings stood at RM403.6 million and RM61.8 million respectively.
The shares of AZRB, whose order book as at end-2014 was worth RM3.4 billion, closed at 71 sen last Friday.
TRC Synergy is controlled by Sufri and executive director Datuk Abdul Aziz Mohamad through Kolektif Aman Sdn Bhd and TRC Capital Sdn Bhd, which collectively have a 24.7% stake in the listed company. Sufri has a direct stake of 9.7% in addition to equity interests held by his investment vehicles.
In FY2014, TRC Synergy posted a net profit of RM3.6 million on revenue of RM814.9 million. Cash stood at RM160.3 million and short-term and long-term debt commitments at RM156.5 million and RM20.7 million respectively.
TRC Synergy, whose order book is just above the RM1 billion band, closed at 40 sen last Friday.
Note: The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Visit www.theedgemarkets.com for more details on a company’s financial dashboard.
This article first appeared in The Edge Malaysia Weekly, on April 13 - 19, 2015.
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