KUALA LUMPUR: Benalec Holdings Bhd is mulling over selling and leasing back some of its land to a real estate investment trust to unlock value and improve cash flows.
With its diversification strategy into oil storage and land-lease projects, Benalec is expected to be stable with higher growth prospects in the future. The strategies will help grow its recurring earnings base in the next 10 years. Benalec’s major projects are located at Tanjung Piai Maritime Industrial Park (TPMIP) with an estimated gross development value of RM12 billion and Pengerang Maritime Industrial Park (PMIP) in Johor, both of which are majority-owned by the company.
Sources close to the matter said Benalec was evaluating the option to sell and lease back its land at TPIMP and PMIP for better cash flows. “Sell and leaseback helps from a cash-flow standpoint. The situation, however, is a bit different because Benalec is not the user of the land,” the sources told Business Times. Group managing director and chief executive officer Datuk Vincent Leaw Seng Hai, meanwhile, said Benalec was actively exploring ways to promote its land at TPIMP and PMIP. “We are keen to explore outright sales, upfront leases, annual leases and joint ventures with potential investors depending on their requirements. “As such, land lease would also be another potential revenue stream in the near future,” said Leaw. On its oil storage terminal project, he said the marine engineering firm was in talks with several potential partners for the first tank storage facility to be set up at TPIMP and operational by 2018.
Benalec foresees the possibility of being a minority shareholder in the oil storage terminal at TPMIP. “We are in the right market and believe that both our Johor projects are poised to capture future market demand within the region and assist in drawing large local and foreign investments onto Malaysian soil. “The rise of southern Johor as a complement to Singapore’s Jurong petrochemical hub would further place Malaysia on the international oil and gas map, reinforcing the idea that Singapore-Malaysia- Indonesia could be Southeast Asia’s equivalent to Amsterdam-Rotterdam-Antwerp,” said Leaw. “We strongly believe that diversification represents the springboard for Benalec to enhance our business sustainability and upscale our growth prospects over the next 10 years and beyond,” he added. On its landbank in Malacca, Leaw said land price growth remained positive even though the state was a mature market.
“The warming of ties and nurturing of collaboration between Malacca and China promises much in terms of connectivity, as exemplified by the planned cruise ship terminal and direct flights between Guangdong and Malacca,” he said. “Along with the proposed KL-Singapore high-speed rail, which will make a stop in Malacca, all these exciting and significant developments augur well for the potential value of Benalec’s landbank in Malacca,” he added. Leaw is confident the company will be able to monetise its reclaimed land sooner to generate more cash flow for its projects in Johor. After reclaiming more than 971.25ha in Malacca over the last 15 years, most of which had been sold and monetised, Benalec still has in excess of 80.94ha of reclaimed land. It also has more than 121.41ha of land which have yet to be reclaimed.