Ekovest unit plans RM2.3b bond issue

Ekovest unit plans RM2.3b bond issue
Business & Markets 2013
Written by Isabelle Francis of theedgemalaysia.com
Tuesday, 24 September 2013 10:46

KUALA LUMPUR: EKOVEST BHD [] subsidiary Konsortium Lebuhraya Utara-Timur (KL) Sdn Bhd (Kesturi), the concession holder of the Duke Highway, plans to issue new bonds worth RM2.3 billion.

According to executives, over RM820 million from the new issue will be utilised to refinance the existing bonds issued for the first phase of the Duke Highway, while RM1.2 billion will be used to fund the second phase of the highway, Duke 2.

The circular to seek Ekovest shareholders’ approval for the proposed Duke 2 was submitted to Bursa Malaysia yesterday, the company said in a statement.

It is learnt that bondholders are expected to vote for the redemption of the RM820 million notes and new issuance tomorrow.

“If bondholders give the nod and everything is finalised, CONSTRUCTION [] for the second phase of the Duke Highway will start as early as November,” said executives, adding that the construction of Duke 2 will not take more than three years.

Kesturi owns and operate the 18km Duke or Duta-Ulu Kelang Expressway spanning from the east to the west along the northern corridor of Kuala Lumpur. The company is wholly owned by Nuzen Corp Sdn Bhd, which is 70% held by Ekovest and 30% by MALAYSIAN RESOURCES CORP [] Bhd.

In December last year, Kesturi obtained an extension of the Duke Highway concession by another 20 years to 2059 (from 2039 initially), as part of an agreement with the government to extend the highway by constructing two additional links — the Sri Damansara link and Tun Razak link. The extension, Duke 2, will cost about RM1.2 billion.

Executives said traffic numbers have been good on the Duke Highway, which was completed in 2009, and have already met the consultants’ projections. With the highway yielding a healthy cash flow, this instils confidence in Ekovest and bondholders for the construction of Duke 2.

“Apart from recurring income, the construction of Duke 2 will benefit Ekovest in terms of construction revenue. Duke 2 will also improve connectivity to Ekovest’s landbank in the Gombak area, where the company has planned multibillion ringgit development projects,” said executives.

The Duke Highway concession was 70% held by Tan Sri Lim Kang Hoo and business partner Datuk Haris Onn Hussein via private vehicle Wira Krystal Sdn Bhd before it was injected into Ekovest in May via a share swap exercise worth RM325.9 million.

The corporate exercise was meant to beef up Ekovest’s businesses to include highway concessions, apart from construction and property development.

For the 2013 financial year ended June 30, Ekovest’s net profit was down 31% to RM50.07 million from RM72.65 million a year ago. Revenue also fell 32% to RM141 million from RM208.95 million due to lesser construction works.

Things may be looking good for the company next year, with the commencement of works on Duke 2 and property launches in Cheras and Gombak.

The company had just launched its RM1.6 billion mixed development in Cheras, EkoCheras, a few weeks ago. It plans to launch The Gateway @ KL Bund project in Gombak by the fourth quarter of next year. The development spans across five parcels of land measuring 25 acres (10ha) and has a total gross development value (GDV) of over RM3 billion.

The Gombak project is situated along Ekovest’s river of life project and will benefit from the improved connectivity once Duke 2 is completed, said executives.

Ekovest also has assets in Johor, including an undeveloped landbank in the 25 acre Danga Bay. The management has no plan for the Danga Bay land for now and will only develop it when the area becomes more matured.


This article first appeared in The Edge Financial Daily, on September 24, 2013.