This article first appeared in The Edge Malaysia Weekly on August 21, 2023 - August 27, 2023
Puncak Niaga Holdings Bhd has seen better days. It used to be the leading water concessionaire in Selangor, and perhaps even the country.
The collapse of the Umno-led Barisan Nasional government in Selangor in 2008 was the start of its downfall. Today, the company is a pale shadow of itself. Its core business is down largely to the construction sector and some plantations. Puncak Niaga has also ventured into building teaching hospitals for the government, for which it has a concession.
The company has long and short-term debts exceeding RM1 billion and cash of RM178 million. The debts are probably tied to its concession projects.
Nevertheless, to reduce its debts, the company is looking to dispose of 166 acres of land in Ijok, Selangor for RM306 million. It has earmarked RM200 million of the proceeds to pay off its debts. The disposal is at RM43 psf, which is below the market price for land of similar size in the area.
But considering the size, potential purchasers would probably shy away from paying full market price for land that big as it would take a long time to develop.
A puzzling element of the proposal is that the payment is to be done over 53 months, which means it would take Puncak Niaga more than four years to collect the full payment.
What happens if the vendor cannot deliver on the payments during the period? Wouldn’t that lead to more legal complications for Puncak Niaga to realise the full value of the land?
According to the announcement, the transaction was entered into on a “willing buyer, willing seller basis”.
Perhaps the board should explore better options and even conduct an open tender for the transaction. If it is to be paid over 53 months, Puncak Niaga might as well enter into a joint venture with a reputable developer to extract better value from the land.
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