Short Position – Tabung Haji, hotel industry, Bandar Malaysia


Fixing Tabung Haji

IN the past, Lembaga Tabung Haji (TH) has played a crucial role in society. The Islamic institution provides various facilities which are comprehensive and systematic for the welfare of Malaysian Haj pilgrims. It was also established in order to enable Muslims to invest and effectively participate in the nation’s economic activities.

Over the years, it has expanded its investment activities to include various economic sectors, such as commercial, industrial, plantation and financial services. However, as an investment fund, things have not panned out as well as can be.

Its huge liabilities have been a point of focus in the past and when the Pakatan Harapan government came into power, the restructuring and rehabilitation of the pilgrim fund was undertaken.

However, when the power shifted to Perikatan Nasional (PN) last year, there was also concern that revamp of the pilgrim fund may have slowed, or taken a backseat.

Alas, the new pronouncements by the PN government are indicating that this government is taking this matter very seriously. This week, it was announced that the government would set up a Royal Commission of Inquiry (RCI) to investigate TH issues.

Subsequently, the Finance Ministry (MoF) said the Cabinet had agreed to undertake a revamp of TH to improve its operations and management. This will include a new operating model for the pilgrim fund, which will be reviewed jointly by the Prime Minister’s Department, MoF, Bank Negara and TH, the ministry said in its statement.

The scope of the RCI would focus on the consultants’ findings on issues arising from the funds from 2014 to 2020. The government also plans to list the institution as a prescribed Islamic financial institution under the purview of Bank Negara under Section 223 of the Islamic Finance Services Act 2013, and will review the Tabung Haji Act 1995 for that.

This is a positive development in efforts to improve things at the fund as an investment institution.

Hotel industry reset

WITH Covid-19 infections showing no signs of abating, it is hard to imagine how much longer the tourism industry can sustain itself in the absence of income.

Hotel operators are among the hardest hit. According to the Malaysian Association of Hotels (MAH), about 120 hotels in the country have ceased operations temporarily or permanently. This includes many renowned brands such as Hotel Istana Kuala Lumpur that will cease operations in early September.

MAH estimates that the hotel industry has already suffered losses of more than RM11bil from the Covid-19 pandemic. It does seem as if the pandemic has decimated the industry.

What is needed is a reset of the industry coupled with new strategies, and some players are attempting to do just that.

Berjaya Corp Bhd CEO Abdul Jalil Abdul Rasheed (pic below) said that the group is planning to list its hospitality arm under a real estate investment trust (REIT) structure.

Berjaya Jalil RasheedBerjaya Jalil Rasheed

He also said that Berjaya, which operates around 36 hotels and resorts, may eventually let go its Berjaya brand and become hotel owners, focusing on five-star international hotel brands in developed markets.

Meanwhile, Impiana Hotels Bhd announced a hospitality and real estate project in Tioman Island with Singapore-based Selo Group. Instead of a normal resort where travellers pay a daily rate, this project will be selling about 23 units to individual owners. The sales from the project will be used to commence work and fund the cost of development.

The question is, who would want to take part in the struggling hospitality industry in the current market? Investors would need to have a three to five-year positive outlook before parting with their money. Maybe some do have such a view, time will tell.

Another issue with the hospitality industry is its workforce, who have been suffering. Many have been furloughed and may have opted to enter into different industries which are less affected by the pandemic. One wonders if there is a reset and resumption of the hospitality industry, would staffing become a pain point?

Bandar Malaysia’s future

THE Bandar Malaysia mega project has fallen through a second time round, raising the question on whether there will ever be a chance of its revival.

Developer Iskandar Waterfront Holdings Sdn Bhd (IWH), controlled by businessman Tan Sri Lim Kang Hoo and its Chinese partner, China Railway Engineering Corp (CREC), said the agreement between them and the government lapsed on May 6 after a failure to meet conditions.

Both the MoF and IWH-CREC Sdn Bhd (ICSB) mutually agreed to terminate the deal which would have involved the latter buying a 60% stake in the Bandar Malaysia project for RM7.4bil.

It is understood that the deal was mutually terminated because the parties could not agree on certain conditions. The question then is, could the deal still happen some time in the future, when and if these issues are ironed out?

Bandar Malaysia development planBandar Malaysia development plan

The Bandar Malaysia project is reportedly the brainchild of ex-Prime Minister Datuk Seri Najib Razak, established to help scandal-ridden state fund 1Malaysia Development Bhd (1MDB) out of its debts back in 2015. The project collapsed in 2017 after fallouts over certain payment transactions.

In April 2019, the 486-acre integrated property development project, located at the site of the Sungai Besi Airport, was revived by the-then Prime Minister Tun Dr Mahathir Mohamad who said that the “Bandar Malaysia project will be revived but with some changes”.

The project is expected to generate “tremendous impact on urban development” in Malaysia, he had said then.

With another new government administration at the helm of things now, it is no wonder that this deal is obviously not a straightforward one. Meanwhile, it looks like shareholders of companies linked to Lim such as Iskandar Waterfront City Bhd and Ekovest Bhd will have to wait a little while longer for their stocks to generate some real excitement.

Obviously, the less than robust growth trend within the property sector is not helping. The cautious stance on the sector is due to the prolonged pandemic which has hammered consumer spending and sentiment.

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