KYM ... Apr10

A packaging products manufacturer, is moving out of its comfort zone, with planned forays into the construction and iron ore processing businesses.

It is also seeking fresh opportunities in the Klang Valley real estate market to expand its income base.

The company would participate in construction jobs within Perak's Teluk Rubiah enclave where Brazil-based mining firm Vale International SA was planning to establish iron ore processing operations and a regional distribution centre for its products, a multi-billion ringgit initiative.

This will involve construction of roads and factories, besides houses and hostels for workers.

KYM via its 54%-owned subsidiary Harta Makmur Sdn Bhd had sold some 480ha (1,200 acres) of leasehold land in Teluk Rubiah to Vale in 2009.

Vale intends to set up a pelletising plant in Teluk Rubiah to process iron ore into pellets as feedstock for steel production. The iron ore will be shipped from South America to Teluk Rubiah. The mining company also plans to establish a distribution centre in Teluk Rubiah to enable the mining firm to have better access to its Asian customers, considering the huge distance between South America and Asia.

"Malaysia project" included a seaport with adequate depth to accommodate ships of 400,000 deadweight tonnes and a handling capacity of up to 30 million tonnes of iron ore in the initial phase. Capital expenditure for the initial phase is estimated at US$900 million (RM2.9 billion), including US$98 million to be spent in 2010. Operations are scheduled to begin in the first half of 2013.

Vale's operations will, however, be confined within an estimated 200ha area while the balance 280ha would serve as a buffer zone. Construction of the facilities in Teluk Rubiah is expected to start in early 2011.

Going forward, KYM could capitalise on its commercial links with Vale to make an initial venture into the iron ore processing business as a new source of income. Both KYM and Vale had deliberated on the idea which could add value to KYM.

The company was also scouting for more land in Kuala Lumpur where the developer intended to develop high-end residential and commercial properties. The move is deemed crucial to grow its property development income contribution to 30% of revenue within two years.

Property development made up less than 1% of KYM's revenue in the financial year ended January 2010.

The expansion to Kuala Lumpur, Malaysia's property hotspot, is seen as a natural progression from the company's initial real estate operations in Teluk Rubiah where the developer still has around 100 acres following the sale of the 1,200 acres to Vale. The remaining 100 acres, earmarked for a mixed development, has the potential to accommodate some 1,000 residential units over the next five years.