Update MRCB sells 30% in DUKE to Ekovest for RM228m

by **Cals** Wed 29 Jan 2014, 18:23

Update MRCB sells 30% in DUKE to Ekovest for RM228m

Business & Markets 2014

Written by Chong Jin Hun of theedgemalaysia.com

Wednesday, 29 January 2014 14:34

KUALA LUMPUR (Jan 29): Malaysian Resources Corp Bhd (MRCB) is selling its 30% associate stake in the concession holder of the 18km Duta-Ulu Kelang Expressway (DUKE) to Ekovest Bhd for RM228 million cash.

In a statement to the stock exchange today, MRCB said the sale of the stake in DUKE,which is deemed a non-core asset, will allow the seller to channel its resources to core operations like property development.

"The proposed disposal is part of the MRCB group’s macro strategy to monetise non-core assets and focus its resources on the core businesses of property development, specialised infrastructure and environment projects where MRCB is in the driver's seat," MRCB said.

It said the proposed disposal would enable MRCB to better utilise and focus its resources on its core businesses. The cash consideration from the disposal could be reinvested into the core business of the company such as property development.

MRCB said it has signed a sales agreeement with Ekovest. Under the deal, MRCB is selling its 30% stake in Nuzen Corp Sdn Bhd to Ekovest's wholly-owned unit Wira Kristal Sdn Bhd.

Ekovest via Wira Kristal already owns 70% in Nuzen. Hence, the acquisition of the remaining stake will give the buyer full control of Nuzen.

Nuzen owns 100% of Konsortium Lebuhraya Utara-Timur (KL) Sdn Bhd (Kesturi) which in turn is the concessionaire of the DUKE.

Under the exercise, MRCB is also selling Kesturi preference shares, and bonds to Ekovest.

MRCB said the company being the minority shareholder in the DUKE, is not expected to gain from the construction of DUKE Phase -2. This is because the project is anticipated to limit Kesturi's cash-flow flexibility to declare dividends to MRCB.

The sale of the DUKE stake also means MRCB no longer needs to recognise losses from Nuzen.

"The proposed disposal is also expected to release the company from any obligation to provide any further equity funding (if required) for the construction of the Duke Phase-2," MRCB said.

MRCB said the exercise is due for completion by the third quarter of 2014.

Meanwhile, Ekovest said in a separate statement that the acquisition of the balance 30% in the DUKE bodes well for the buyer's financials.

Ekovest said having full control of the DUKE will give the buyer additional recurring income.

"Moving forward, the performance of the DUKE is expected to improve with the expected increase in traffic volume over the duration of the concession period and is expected to strengthen the earnings of the group in future years.

"The expected completion of the DUKE Phase-2 at end-2016 is expected to further increase the traffic volume of the DUKE," Ekovest said.