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Apart from operating a sprawling nationwide network of postal service outlets, the golden egg in Pos Malaysia Bhd’s nest is the strategic land its properties occupy.
But with the recent sale of Khazanah Nasional Bhd’s 32.21% stake in Pos Malaysia to DRB-Hicom Bhd for RM622.8 million, it appears that the national postal operator’s valuable landbank had been given little time to ripen.
As part of the deal, Pos Malaysia has to obtain Federal Land Commission (FLC) approval for some 16 pieces of leased land to also be used for commercial purposes, in addition to postal services.
Should Pos Malaysia fail to secure the liberalisation of land usage by year-end, Khazanah Nasional shall refund DRB-Hicom part of the RM17.3 million which formed the total purchase consideration.
The four large pieces of land Pos Malaysia directly owns have a combined size of 10.5ha and an estimated market value of RM218.5 million, according to AmResearch’s data.
This includes Pos Malaysia’s Pos Laju centre and a vehicle warehouse along Jalan Tun Sambanthan in Brickfields, not far from KL Sentral.
AmResearch estimates that the 0.9ha Brickfields land alone is worth some RM176.3 million or RM1,500 psf.
This is not bad given that the estimated net book value of the land was a mere RM2.2 million.
Surely, this begs the question as to whether Khazanah Nasional and by extension, the government, could have gotten a better deal had it first obtained the green light for reclassification of the land before putting up the stake for sale?
Pos Malaysia has been holding these properties for a very long time, but there had been no real push in the past to obtain approvals to develop commercial properties on the land.
It is worth noting that there are 16 properties leased by Pos Malaysia from the FLC which are pending reclassification.
The most valuable land awaiting a status transfer is Pos Malaysia’s 1.3ha on Jalan San Peng, near the proposed Pudu Jail land redevelopment site by UDA Holdings Bhd and its joint venture partners.
AmResearch said it is positive about the liberalisation negotiation on the land, which currently houses workers’ quarters.
The research house estimates the prime land to be worth RM107.4 million, compared with its book value of just RM6 million as at end-2009.
According to calculations by AmResearch, Pos Malaysia could see a 55 sen per share revaluation surplus by just taking into account the four plots of land directly held by the company and assuming a successful bid to reclassify the Pudu land for commercial purposes.
In late April, OSK Research was among those who had opined that the RM3.60 per share acquisition price was unattractive, shortly after Khazanah Nasional’s decision to divest its shareholding in Pos Malaysia to DRB-Hicom had been announced.
Among other reasons, OSK Research said the price DRB-Hicom was paying for the strategic stake did not adequately reflect the value of Pos Malaysia’s landbank.
DRB-Hicom may have been able to bargain for the purchase consideration to exclude the potential future land premium given that DRB-Hicom would have to inject substantial investments to refurbish post offices and upgrade IT infrastructure, OSK Research said.
Analysts expect DRB-Hicom, a company controlled by tycoon Tan Sri Syed Mokhtar Albukhary, to unlock the value of Pos Malaysia’s land by embarking on redevelopment projects instead of going the route of selling the land outright.
“We believe that with the impending entry of DRB-Hicom and its property development arm, Hicom Properties Sdn Bhd, Pos Malaysia may co-develop the land with new owners,” AmResearch said in note in April.
If this comes to be, the government is effectively excluded from realising the full value of the land Pos Malaysia occupies.
Khazanah Nasional’s divestment of its stake in Pos Malaysia after a keenly watched bidding process had put pressure on the latter’s stock price since April.
Investors appears to have continued to punish Pos Malaysia’s stock, sending the price down to a six-month low yesterday of RM2.94 from a one-year high of RM3.58 on April 4.
Analysts had earlier opined that this was likely due to the fact that DRB-Hicom had given little inkling as to its business plans for the postal business.
Pos Malaysia’s stock currently has three “hold” calls and three “buy” calls, with a consensus target price of RM3.74, according to Bloomberg data.
Perhaps, Khazanah Nasional could have taken a cue from Syarikat Prasarana Negara Bhd’s (Prasarana) plans to participate in the anticipated upside in property prices from the multi-billion ringgit mass rapid transit (MRT) project.
In February, Prasarana revealed that it was firming up its plans to develop property projects along the MRT alignments which would allow the government to directly benefit from any property upside and recoup some of the infrastructure costs.
This intention was eloquently put by Land Public Transport Commission or Suruhanjaya Pengangkutan Awam Darat CEO Mohd Nur Ismal Mohamed Kamal when he said: “Previously, property plays benefited everybody else but the government. This time around we want to make sure that the upside created (will also benefit the government)”.
