S$150m Bid For DRB-Hicom Mall

Source : The Business Times, 14 February, 2008

But management is unlikely to sell the mall, in S’pore’s Little India area, anytime soon

Malaysia’s largest integrated automotive concern, DRB-Hicom Bhd, has received a S$150 million offer for a shopping mall it owns in Singapore’s Little India area, Malaysia’s Business Times reported, citing people familiar with the matter.

The offer is some 50 per cent more than what the company received in 2006. However, it is unlikely to sway the management team to sell the Singapore asset anytime soon.

‘There won’t be a fire sale of assets. Instead, there are plans to make additional investment into the asset before a transparent sale can be considered,’ said a person representing a shareholder of the company, speaking on condition of anonymity.

It is believed that DRB-Hicom intends to pump in between RM10 million and RM20 million (S$4.37 million and S$8.74 million) to refurbish and rebrand the six-storey Tekka Mall, which sits on 6,332 sq m of commercial land between Serangoon and Sungei Road.

DRB-Hicom bought the land a year before the Asian financial crisis and started developing it 2002. It is estimated that its cost of investment, including the land, is about S$188 million.

Tekka Mall (the automotive group’s first property venture abroad), alongside Raba Nyrt (Hungary’s only publicly traded vehicle parts maker), is among assets deemed as non-core. They have been earmarked for sale to raise about RM500 million in fresh capital.

DRB-Hicom, under the stewardship of managing director Mohd Khamil Jamil, has been doing a juggling act of selling assets and buying new ones. This is aimed at reducing debts and adding more urgency to the group’s focus.

Although a mainstay in the automotive sector, DRB-Hicom has sizeable interest in property development, defence and services.

It also has interest in the plantation business via its ownership of the fully matured Connemara Estate, which sits on 6.26 million sq m of land in Ulu Langat, Selangor.

The estate land could be converted for property development. But for now, DRB-Hicom is content to reap dividends from firm palm oil prices.

Mr Mohd Khamil declined to speak on specifics, but told the Malaysian business paper that the management team’s efforts thus far had been helped by the free hand given by major stakeholders of the company.

The major shareholders are tycoon Syed Mokhtar Al-Bukhary (15.4 per cent), the Employees Provident Fund (17.48 per cent) and Khazanah Nasional Bhd, the government-owned investment arm (10.33 per cent).

Since his appointment to the job in February 2006, Mr Mohd Khamil’s team has shaved off almost RM505 million of the group’s debts by getting rid of non-core businesses and improving operational and financial efficiency to strengthen the group’s balance sheet.

To date, DRB-Hicom has outlined plans on the sale of its stake in EON Capital Bhd and Uni.Asia Capital Sdn Bhd, which will raise about RM2 billion cash.

As at March 31, 2007, DRB-Hicom had debts of about RM2.2 billion. Interest on the debts for the year under review stood at RM143.69 million, or about 94 per cent of its net profit of RM156.53 million.