KUALA LUMPUR (March 10): UEM Group Bhd has dropped its plan to divest its construction unit UEM Builders Bhd, after considering the unfavorable response to the proposal from its existing clients.

“We have received interest to acquire UEM Builders, but our clients want us to give them our undertakings to ensure that the disposal will not affect the delivery of (our) infrastructure projects,” said said chairman Tan Sri Ahmad Tajuddin Ali.

“Given that we are still liable to potential delays and faults in these projects, the board has decided to call off the disposal,” Tajuddin told a press conference, after UEM Group's 50th anniversary celebration today.

In the past couple of years, Khazanah Nasional Bhd, the parent company of UEM Group, was reported to be in talks with construction companies to sell UEM Builders, as it was seen as a non-competitive asset in the group.

Following the decision to halt the sale, the group is now exploring options to establish a new business model, which includes an expansion into affordable housing and township management.

Chief executive officer Datuk Izzaddin Idris said UEM Group plans to set up a new entity to develop affordable homes, while its existing property development unit UEM Sunrise will continue to focus on the high-end residential segment.

“Affordable housing is a volume game and we will need a new building method, i.e. building systems to build our affordable homes, as they are less dependent on labour and cost less. At the moment, we are looking at locations nearby the alignment for the Mass Rapid Transit (MRT) lines for our affordable housing projects,” he added.

Izzaddin went on to say that the group will also be expanding its overseas presence in countries such as India and Indonesia, where infrastructure is in demand.

“In Australia, the launch of our two projects received overwhelming response and there’s a strong demand for asset and facility management services in the Middle East,” he said.

Apart from its involvement in the engineering and construction business, UEM Group’s core businesses also include highway operation and maintenance through 51%-owned PLUS Malaysia Bhd, property development via 66%-owned UEM Sunrise, and asset and facility management via 70%-owned UEM Edgenta Bhd.

In Khazanah’s restructuring programme post the 1997 Asian financial crisis, the group disposed of major non-core assets such as Putra, Park May, EPE Power, Crest Petroleum Bhd, and TimeCel Sdn Bhd to tackle its RM30 billion debts in 2011.

Thanks to the painful yet right decision to divest of non-core assets, Tajuddin said UEM Group today has a stronger balance sheet, with low net gearing and would be able to make strategic investments, when the opportunity arises.