Penang says no to PGCC

Five months after a change in the government of Penang, Abad Naluri Sdn Bhd, the company that had wanted to undertake a controversial multi-billion-ringgit property development project in the state received confirmation that its proposal had been rejected.

Taking the rejection in stride, Equine Capital Bhd, which has a 25% stake in Abad Naluri, will be going back to the drawing board to map out new plans for its most valuable property development project, the Penang Global City Centre (PGCC).

Municipal Council of Penang Island president Datuk Zainal Rahim, when contacted yesterday, said that the council formally rejected Abad Naluri’s proposal on Aug 6.

It is believed that the proposal is a revised one submitted by the company. The PGCC project, which was to take shape on the site of the existing Penang Turf Club in Batu Gantong, became a subject of controversy during the March 8 general election due to, among other factors, its sheer size.

After the general election, the newly formed state government under the Pakatan Rakyat coalition said that it wanted the project to be scaled down and that it did not have any formal proposal from Abad Naluri.

In a related development, Equine’s executive chairman Datuk Patrick Lim Soo Kit said: “Right now, the (PGCC) project has not been approved and at this point in time, there have been many changes that affect the project. We are reviewing and taking stock of them to make the necessary adjustments.

“We’re almost starting from zero because we do have a new state government in place and like all developers, we have to conform to all the rules and regulations. Because there have been changes, the bottom line on PGCC is we need to go back, we need to review, and we do not expect any changes to the situation in the near term.”

Speaking to reporters after Equine’s AGM in Seri Kembangan, near here, yesterday, Lim described the coming year as one of “consolidation” for Equine Capital, with probably no new property launches for the rest of this fiscal year.

“We are unlikely to have product launches this year due to the fact that we are in this consolidation period. We are looking at all our product lines and re-engineering. In this fiscal year, we will not be going to the market,” he said.

Responding to speculation that he was looking to exit Equine, Lim said the priority was to ensure the company was on a steady footing. However, he neither confirmed nor denied the rumour.

Abad Naluri’s proposal to build the PGCC, to which analysts tagged a gross development value of up to RM20 billion, had been fraught with controversy in the last two years. In fact, there were many big boys eyeing the project but little-known Abad Naluri won the bid.

Contributing factors included the previous state government’s decision to re-zone the proposed site from recreational to mixed development prior to giving it the nod. Some members of the turf club had also filed a police report alleging that the transaction at RM43 per sq ff was not favourable to the club.

There is also the looming spectre of a new racetrack owed to the Penang Turf Club (PTC) in Batu Kawan worth RM400 million that has yet to be built. The new racetrack was meant to be part-payment to PTC for the grounds of the existing racetrack.

It is not clear how the arrangement will work now that the status of the PGCC project is uncertain.

Meanwhile, a poor financial year for Equine Capital meant the company has more than just the Penang projects to worry about. Lim said fluctuating production costs and uncertainty in the retail market had taken a big bite out of the bottom line of its core business in township development.

The company posted a net loss of RM28.8 million for the fiscal year ended March 31, 2008, compared with a modest net profit of RM3.56 million for the previous year. The loss came even as turnover grew 45%, from RM74.74 million to RM108.97 million.

Lim said that the company has about RM126 million of unbilled sales in the previous fiscal year, but he could not be certain that the entire amount would be realised.

Equine’s unaudited results for its first quarter ended June 30, 2008 continued the downward trend. It reported a negligible net profit of RM26,000, down from RM580,000 a year earlier.

Lim declined to provide a current gross development value (GDV) estimate for Equine’s 640 acres of landbank in Seri Kembangan and Batu Kawan. He said that since Equine’s product lineup was being overhauled, the GDV of its land could not presently be determined. The previous estimate was RM800 million.

by Fong Min Hun (The Edge Daily)

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