BIZ ANALYSIS KUALA LUMPUR - When Prime Minister Najib Abdul Razak rolled out the New Economic Model (NEM) in March to transform the nation into a high-income economy, few were able to fathom the full extent of his far-sighted vision.Seven months on and several moves later by both the public and private sectors to model themselves on being "NEM-compliant" have perhaps resulted in seemingly strange bedfellows turning themselves into business partners.
A notable example was the recent move by UEM Land Holdings Bhd to acquire Sunrise Bhd, a high profile player in the property sector, and this somewhat echoed the prime minister’s vision of a state-linked entity working with entrepreneurial companies to "create value whose whole is greater than the sum of its parts".
With real estate experts and analysts declaring the deal as a "best fit", UEM Land can now capitalise on Sunrise’s expertise in high rise, high yield developments to fill gaps when embarking on high net worth projects here and abroad.
Market watchers say that Khazanah Nasional Bhd, through UEM Group Bhd, was on target in spotting opportunities to "marry the surprise bride in Sunrise" and bolt on the X factor of business acumen from tycoon Tong Kooi Ong, executive chairman of Sunrise, instead of trying to grow that expertise organically, which may take many years to develop.
"With most of UEM Land's land banks situated in the growth areas of Cyberjaya and Nusajaya, it would now begin to realise their fullest potential," said Wong Wei Sun, an analyst at Maybank.
Wong said the rationale of UEM Land’s takeover is to ride on Sunrise’s expertise in high-end multi-storey developments in the Klang Valley.
Analysts are quick to point out that UEM Land had factored in several key considerations into the deal, such as leveraging on Sunrise's expertise for new developments in Nusajaya and Cyberjaya and taking that expertise further overseas to countries like India, Brunei and the Middle East where UEM Land has
a sizeable presence.
Terence Wong of CIMB Research said the merger would create a Malaysian property giant that would have the might and ambition to go regional, if not global.
The synergy to be derived from the merger also lies in UEM Land's connections with the top government leadership, he said.
"Likewise, Sunrise’s strengths to take advantage of opportunities and strong business acumen can be harnessed for the benefit of the enlarged UEM Land," said Wong, adding that the emergence of a credible giant Malaysian developer would also augur well for the local property sector as the enlarged UEM Land could be a candidate for the inclusion of the KLCI's 30 component stocks.
Credit Suisse analyst Amir Hamzah said the acquisition would enable UEM Land to extract more value from its massive land bank in Nusajaya and get exposure to the lucrative Mont Kiara market in Kuala Lumpur.
On the other positive points for UEM Land in the deal, Amir Hamzah said the acquisition of Sunrise was likely to raise UEM Land’s profile in Singapore, where its parent, Khazanah, would jointly develop several parcels of high value prime land in Rochor and Marina Bay under the railway land agreement.
Still, many industry players are asking what advantages does Sunrise gain from accepting the offer from UEM Land, if it already has the technological prowess and financial clout that many players in the industry lack?
With the deal, UEM Land will have large land banks spread over Iskandar, Cyberjaya, Mount Kiara, downtown Kuala Lumpur, Kajang and Canada, thus giving investors less concentrated geographical risks and exposure to different growth areas.
According to Tong in a recent interview, Sunrise’s sizeable near-term earnings would complement the much stronger longer-term potential of Iskandar and would reduce UEM Land’s price earnings multiple by half.
In addition, many industry observers are quick to add that Tong’s presence on the board of UEM Land would add lustre and prestige to the state-linked property company besides injecting skills given his strong reputation as a savvy businessman and shrewd dealmaker.
On the other hand, some analysts are also asking whether the merger could result in a conflict in corporate cultures.
However, one property industry observer said unlike other entities, property company cultures need not merge.
"A property company is focused on a project-to-project basis. There are different teams handling different kinds of projects," he said.
With UEM Land's township development track record in Nusajaya and Sunrise’s expertise in the commercial and high-end residential sectors, the merged entity is heading towards becoming Malaysia’s leading real estate company by market capitalisation, landbank and earnings potential, he added.
As things stand, this deal is first off the starting blocks as far as the NEM roadmap is concerned. It needs to show results by gaining traction with the fusion of business acumen and human talents to bolster Malaysia's climb up the value chain.- Bernama
Strange bedfellows indeed as one time whiz kid analyst Tong Kooi Ong morphed into a banker but seen to be aligned to Anwar Ibrahim. But looks like all is forgiven now.
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