Reliance Pacific, Daim's family in Zouk land venture

THE EDGE WEEKLY ISSUE#991

THE WEEK OF DECEMBER 2 – DECEMBER 8, 2013

By Ben Shane Lim & Siow Chen Ming

Reliance Pacific Bhd (RPB), a travel and hotel operator-cum-property developer, may attract interest for being a party in the potential redevelopment of the 1-acre Zouk Club site in Jalan Ampang together with the family of former finance minister Tun Daim Zainuddin.

According to the filings with the Companies Commission of Malaysia (CCM), RPB owns a 40% stake in Menara Ampang Sdn. Bhd, the landlord of Zouk.

Daim’s wife, Toh Puan Mahani Idris, and son, Md Wira Dani Daim, own the remaining 60% of Menara Ampang.

Sources say Zouk has found a new site in Jalan Tun Razak, where it will begin construction of a new club after Chinese New Year and move to the new premises by the 4^th quarter of next year.  The relocation of the popular disco club will make its current site – opposite Lai Meng School – available for redevelopment.

“The landlord plans to develop high-rise residences and offices on the site,” says a source familiar with the matter.

Property insiders say the Zouk Club land, previously owned by Bolton Bhd, is now owned by Daim’s family, but many are not aware that RPB also owns a substantial interest in the property.

RPB has announced to Bursa Malaysia in March last year that it had acquired a 40% stake in Menara Ampang from Daim’s family for RM36.4 million.   However, the announcement, which did not say Menara Ampang owned the Zouk land, went largely unnoticed.

The major shareholders of RPB are chairman Datuk Gan Eng Kwong and his wife Datin Irene Tan (CEO), who jointly own a 47.18% stake.  Others include Daim’s family vehicle, Ibu Kota Developments Sdn Bhd, which owned a 4.49% stake in RPB as at Aug 6, and Datuk Mukhriz Mahathir with a 5.26% stake.

RPB is only slightly profitable with a net profit of RM1.7 million in FY2013 ended March and RM1.63 million in FY2012 on revenue of RM215.3 million and RM240 million respectively.

While the company is flying largely under investigator’s radar screen, its market capitalisation is a respectable RM339.1 million based on the stock’s close of 39 sen last Wednesday.  It had net borrowings of RM139.8 million as at June 30.

RPB’s market worth could be supported by its property assets, such as the Admiral Cove Marina Resort and surrounding land as well as the Avillion Hotel in Port Dickson.  The company also owns 7.5 acres of freehold land in Setapak, a 0.63-acre freehold parcel in KL City Centre (not the Zouk land), and 12.2 acres in Langkawi, according to its latest annual report.

At the moment, it is developing affordable landed housing in the 165-acre Desa Impian township in Muar, Johor.

Thus far, revenue from property development has been small – only RM3.2 million in the 1^st quarter ended June 30, compared with RM32.6 million from the tourism division and RM10.8 million from hotels.

Nevertheless, the Zouk land could be a potential catalyst for RPB, given its strategic location in the Golden Triangle.

In 2011, Henry Butcher Malaysia Sdn Bhd gave the Zouk land a fair value of RM90.3 million, which translates into RM2,073 psf.  Now, real estate agents say the land could fetch RM100 million or more.

The closest price benchmark is the nearby Bok House property acquired by Tropicana Corp Bhd in 2009.  the 1.3-acre parcel was bought for RM2,200 psf or RM123 million from South Korea-linked Mercury Property Management Sdn Bhd.  Mercury had itself acquired the site from the estate of Chua Cheng Bok for a little under RM103 million in 2008.

Tropicana is planning a 50-storey tower, comprising a luxury hotel and residences branded under W Hotel, on the Bok House property.  The project has an estimated GDV of RM900 million.

Given the proximity of the Zouk land to the Bok House property, and factoring in the time premium, the site of the popular disco could possibly match the RM900 million GDV of the W Hotel project.

Meanwhile, across the road and directly opposite Zouk, development work on the 2.6-acre Lai Meng School land – now owned by Magna Prima Bhd – will commence next year.  The plan is to build two 60-storey towers with an estimated GDV of RM1.8 billion there.

In notes accompanying its 1QFY2014 results, RPB says “ a few development projects are now being planned for launch from 2014 to 2017”.

It did not elaborate, but there is a likelihood that the Zouk land project may take place in that period.

RPB’s shares hit a high of 80 sen in early 2011, but have since lost half their value.  They have been hovering at around 40 sen to 45 sen this year.  The stock needs a catalyst and the Zouk land development could be it.