‘Bailout’ fears unsettle Khazanah amid merger plan to create giant property firm

PUTRAJAYA: Frantic attempts by certain parties to have a private property developer linked to a prominent tycoon merged with the government-owned UEM Sunrise is unsettling sovereign fund Khazanah Nasional, highly placed sources have confirmed to FMT.

This is because the plan has been termed a “bailout” and is likely to trigger fresh allegations of cronyism against the Mahathir administration.

It is learnt that stakeholders in UEM Sunrise, a property developer owned by Khazanah, are resisting the proposal to merge with Eco World Development Group, a public-listed company behind several new integrated townships and luxury projects with close to RM90 billion in total gross development value.

“The UEM Sunrise board is against the deal. They have rejected it,” said the source, speaking on condition of anonymity.

Singapore’s The Straits Times last month named tycoon Syed Mokhtar Albukhary, the largest shareholder in Eco World, as the individual leading the charge for the merger along with Eco World founder Liew Kee Sin.

UEM Sunrise reportedly said it had not received any corporate proposals for such a merger.

FMT has been made to understand that some within Khazanah are supportive of the merger plan, which would give birth to one of Malaysia’s largest real estate companies in market value.

But a source said based on the finances of both entities, UEM Sunrise would be on the losing end.

“To put it bluntly, it would be a bailout for Eco World. Despite their recently reported higher earnings, their unaudited fourth quarter results tell a worrying story,” the source said.

Based on the unaudited figures available on Bursa Malaysia’s website, the source said, Eco World’s total borrowings stand at nearly RM4 billion, including short-term debts of close to RM2 billion.

“This exposes it to high refinancing risk,” said the source.

According to the source, the report also states that Eco World has a cash balance of around RM600 million, with an increase in unsold inventory from RM169 million in 2018 to nearly RM600 million in 2019.

“The merger would essentially see UEM rescuing Eco World from its current predicament,” it added.

“Political backlash will be strong on any bailout issues as the financial situation at Eco World is dire. People will question how such a deal benefits national interests and their welfare.” - FMT

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