This article first appeared in The Edge Malaysia Weekly on June 2, 2025 - June 8, 2025

SHARES in Mulpha International Bhd (KL:MULPHA) have defied global uncertainties, including tariff pressures and economic volatility, gaining 29% for the year. This stands in stark contrast to the FBM KLCI, which has declined by 7.5% over the same period.

A key driver behind Mulpha’s strong share price performance could be its indirect effective equity interest of 15.2% in Aveo Group, Australia’s retirement living provider that is currently up for sale for about A$3.5 billion (RM9.54 billion).

According to the Australian Financial Review, Aveo’s controlling shareholder, Canadian private equity firm Brookfield Asset Management Inc, has granted exclusivity to Scape Australia, the country’s largest student accommodation provider, as the lead bidder.

Earlier reports listed other interested bidders for Aveo, including Singapore’s sovereign wealth fund GIC, AustralianSuper (the country’s largest superannuation fund), South Korea’s National Pension Service and real estate firms Charter Hall and Oxford Properties.

Asked about the matter, Mulpha general manager Marc Lee acknowledges that Brookfield is running a sale process. He says: “Our interests are minority, and our rights are governed by the scheme documents accepted at that time in 2019. We will not be making any forward-looking comments or statements and will make all necessary announcements to Bursa [Malaysia].”

Owing to regulatory pressures on the sector, Brookfield made an offer in August 2019 to privatise the then Australian Stock Exchange-listed Aveo.

Shareholders had the option to either receive cash or transfer their investment into a Brookfield-managed investment vehicle that would hold Aveo, at a price of A$2.195 per share. The transaction, valuing Aveo at A$1.27 billion, was finalised at end-November 2019, leading to its delisting.

The latest A$3.5 billion valuation is nearly three times the amount Brookfield paid almost six years ago. Based on Mulpha’s effective stake of 15.2%, a simple calculation suggests it could be entitled to as much as A$532 million (RM1.45 billion).

Mulpha had been Aveo’s single-largest shareholder since investing in the company in 2005, with a 24.4% stake. As part of the 2019 transaction with Brookfield, it received A$304.47 million comprising a cash consideration of A$125.89 million and a scrip consideration of A$178.58 million. As a result, Mulpha’s effective stake in Aveo was reduced to 15.5%.

Under the scrip deal, Mulpha received 178.58 million Class B1 shares and an equal number of Class B1 loan notes — carrying an annual interest rate of 5.44% — from Hydra RL TopCo Pty Ltd (TopCo). These securities are held through Mulpha’s 96.1% stake in AOG Limited Partnership, a Bermuda-based investment holding entity.

AOG holds a 16.1% stake in TopCo via Class B1 securities, and the remaining 83.9% is owned by Brookfield through Class A shares. TopCo is the holding company of Hydra RL BidCo Pty Ltd (BidCo), the sole shareholder of Aveo.

Brookfield’s higher-ranking shares mean it is the one making key decisions about Aveo’s potential sale and future direction, including the distribution of bumper dividends following a successful transaction.

In FY2023, TopCo issued additional shares to its management staff, diluting AOG’s interest to 15.8%. As a result, Mulpha’s indirect effective equity interest in Aveo shrank, from 15.5% to 15.2%.

Aveo currently operates more than 10,000 units across 65 villages and has more than 3,000 units in its development pipeline.

The Australian aged care sector was reportedly valued around A$40 billion and offers competitive returns, with freehold yields ranging from 6% to 7.5% and going concern yields between 13% and 15% — surpassing those of the office and industrial markets.

The sector is witnessing a surge in billion-dollar investments and strategic partnerships. Notable transactions include US giant Invesco Ltd’s A$1.1 billion expansion with Stockland Corp Ltd, Avid Property Group’s A$1.1 billion venture, Mirvac Group and Pacific Equity Partners’ A$1 billion agreement, and Macquarie Group Ltd’s A$2.85 billion initiative aimed at the Australian land lease community sector.

According to Mulpha’s latest financial filing, it has entered into negotiations in the financial year ended Dec 31, 2024 (FY2024), for the divestment of its investment securities in TopCo and has reclassified the asset as held for sale with a fair value of RM596.53 million as at March 31, 2025.

“The group is compelled to divest the investment securities as part of a drag clause in the shareholders deed of TopCo. The divestment is expected to be completed by the second half of 2025,” according to its 1QFY2025 filing.

Apart from the Aveo deal, Mulpha has undertaken a capital recycling initiative, which includes the sale of Capri Via Roma Shopping Centre in Gold Coast, Australia, for RM237.71 million. It is also in the process of selling a 20% stake in Brimbank Shopping Centre in Melbourne, with the divestment carrying a value of RM49.46 million.

Mulpha is one of Malaysia’s largest and earliest real estate investors and developers in Australia, with total assets of RM6.36 billion. As at last Thursday’s closing price of RM3.15, its shares were trading well below the net assets per share of RM11.02.

The group’s 10 most valuable properties have an aggregate net book value of RM4.22 billion, or 66% of total assets — they comprise eight properties in New South Wales and Queensland, Australia; the Leisure Farm township in Johor; and one in Auckland, New Zealand. Seven of these properties were revalued in 2023 and 2024.

Mulpha’s assets in Australia include the resort-style Sanctuary Cove on the Gold Coast, Norwest Business Park in Sydney, InterContinental Sydney Hotel, Transport House in Sydney, InterContinental Hayman Island in the Great Barrier Reef as well as vineyard Bimbadgen Estate in Hunter Valley.

In New Zealand, it owns the four-star Nesuto Stadium Hotel and Apartments in Auckland; and in the UK, it owns The London Marriott Hotel Grosvenor Square in Mayfair.

In Malaysia, it developed Leisure Farm, a 1,765-acre freehold township introduced in 1991, with a gross development value of RM2.5 billion. The township currently comprises 1,029 residential units.

Mulpha currently holds a 22.18% stake in Thriven Global Bhd (KL:THRIVEN), formerly known as Mulpha Land Bhd. Previously, Mulpha owned 61.93% of Mulpha Land but divested its majority stake in 2015 to Teladan Kuasa Sdn Bhd, the private investment vehicle of Datuk Fakhri Yassin Mahiaddin, son of former prime minister Tan Sri Muhyiddin Yassin.

Mulpha generates the majority of its revenue from its hotel and leisure division. However, its property investment and finance segment — comprising rental income and its loan portfolio — contributes the highest profit before tax (PBT).

In FY2024, Mulpha recorded total revenue of RM1.03 billion, a 14% decline from RM1.2 billion in FY2023. Net profit also fell 35% to RM71 million. The lower revenue was attributed to reduced development settlements in Norwest, Sydney, while the decline in profit before tax (PBT) was due to a one-off development loss from its affordable housing project in Leisure Farm, Johor.

By sector, the hotel and leisure division saw a significant boost in profitability, with PBT surging 67.9% to RM67 million from RM39.9 million, as revenue grew 9.5% to RM744.57 million from RM679.81 million.

The property investment and finance segment generated RM126 million in PBT on RM99.58 million in revenue, compared to RM60.71 million in PBT on RM107 million in revenue the previous year.

Meanwhile, property development swung to a loss of RM36.86 million from a prior-year profit of RM67.79 million, with revenue plunging 62.6% to RM134.82 million from RM360.71 million.

In 1QFY2025, Mulpha reduced its net loss to RM4.08 million, down from RM7.24 million a year earlier, driven by lower operating expenses and finance costs. Quarterly revenue declined 14% to RM211.33 million from RM245.8 million, as all segments recorded a weaker performance.

Mulpha’s enterprise value now stands at RM3.23 billion, based on a market capitalisation of RM980.21 million, total borrowings of RM2.37 billion and total cash holdings of RM122.8 million. The majority, or 89.7%, of the loans, totalling RM2.13 billion, are denominated in Australian dollars.

It is only logical that the proceeds from the Aveo divestment be used to retire the Australian borrowings. In FY2024, a back-of-the-envelope calculation indicated an interest rate of about 6%, based on finance costs relative to total borrowings. The group’s net gearing ratio now stands at 65%.

Lee Seng Huang, 50, is executive chairman of Mulpha and holds a 71.66% stake in the company — comprising a direct stake of 6.53% and an indirect stake of 65.13%. He is the youngest son of Mulpha’s founder, Lee Ming Tee, who is now 84.

In September 2022, the Lee family made an unconditional voluntary takeover offer to acquire all remaining Mulpha shares they did not own at RM2.30 per share. Since then, their ownership has increased to 71.66%, from 50.02%.

Seng Huang is also group executive chairman of Sun Hung Kai & Co Ltd, a Hong Kong-listed financial services company jointly founded in 1969 by tycoons Fung King Hey, Kwok Tak Seng and Lee Shau Kee — the mogul behind Sun Hung Kai Properties and Henderson Land Development.

In 1996, Ming Tee acquired a substantial 33.18% stake from the Fung family through his Hong Kong-listed Allied Group Ltd. By end-2003, he had increased his stake to more than 70%.

The Lee and Lee Trust holds a 74.98% stake in Allied Group, which, in turn, controls 73.51% of Sun Hung Kai.

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