Benalac ... Sep12

Benalec, which the rights to reclaim land at the southern tip of Johor is negotiating with several foreign tank farm operators to sell it the first reclaimed parcel of 250 acres.

The company is confident of closing a deal within the next few months and expects to commence reclamation works at Tanjung Piai, Johor as early as the second half of 2013.

The tank farm operators are from the Middle East, Europe and China. Some of them are already operating at the Jurong Industrial Park in Singapore, but they are looking for more land to expand their capacity.

The company expects earnings from the reclamation works to be reflected in its earnings for the financial year ending June 30, 2014.

The 250 acre parcel is just a small portion of the thousands of acres of reclaimable land Benalec is entitled to in Johor, but being the first, its success is crucial for the company to market the entire project on the international stage.

It had signed two development agreements with the Johor government to reclaim 3485 acres in Tanjung Piai and another 1760 acres along the shoreline of Pengerang, also in Johor.

The DAs essentially allow Benalec’s 70% owned Spektrum Kukuh Sdn Bhd and Spektrum Kukuh Sdn Bhd, to reclaim land in the two areas and obtain a lease of 99 years. In return, the Johor government would get an undisclosed amount of upfrom premium plus 3% of the gross sales of the net saleable area of the reclaimed land. This is to ensure that the state government rides the upside potential of the valuation of the land.

Johor has several property projects catering for the oil and gas industry. In the face of competition, Benalec’s strategy is to sell the plots of Tanjung Piai to international tank farm operators, not only for storage of crude oil but also edible oil. As for the plots in Pengerang, it hopes to sell them to fabricators.

The company could carve out a niche amid the ongoing developments in the 22000 acre Refinery and Petrochemical Integrated Development (RAPID) complex, which is also in Pengerang. RAPID is an initiative led by Petronas, there is a possibility of Benalec’s Pengerang project being included in the RAPID master plan.

There is interest in the Benalec plots because both the entitlement areas (Tanjung Piai and Pengerang) have good sea frontage and will be accessible to sea transport. The company plans to build a jetty at Tanjung Piai and a port at Pengerang upon completion of the reclamation works.

In terms of the funding the reclamation works, the company has raised rm100 million from a placement exercise and is looking to borrow another rm100 million. Benalex is presently net cash.

Benalec plans to sell some reclaimed parcels in Klebang, Melaka to raise funds. The company still has 300 acres of reclaimed land there that is available for sale. It also has the rights to reclaim another 500 acres along the Klebang shore, where the Boon Siew group is planning a lifestyle and medical city development.

Benalec had been holding back the sale of its reclaimed land in Melaka while approving for a new highway to be built there.

Benalec’s major shareholder and MD Datuk Vincent Leaw has been acquiring shares in the open market, raising his family’s stake to 54.41% as at Sept 12, 2012. The company has been buying back its own shares.