Management Discussion & Analysis



For the financial year ended 31 March 2015 (“FY2015”), Ireka Group recorded total revenue of RM426.2 million, an increase of 47.1% compared to the FY2014. The Infrastructure Division through its construction activities remain as the major revenue contributor for the Group, accounting for approximately 83.6% of the Group’s total revenue. This is followed by the Property Development Division at 11.1%, as a result of the remaining sales of the Kasia Greens project during the year. The remaining revenue is contributed by the Trading and Services Division which includes contributions for the development management services provided to Aseana Properties Limited (“Aseana Properties” or “Aseana”), a 23.07% associate of Ireka Corporation Berhad, and the Technologies Division.

The Group has recorded higher revenue from construction activities in FY2015. With lower administration expenses and lower share of losses from Aseana Properties in FY2015 compared to FY2014, the Group’s losses have significantly narrowed to RM2.4 million compared to RM27.3 million incurred in FY2014. The losses from Aseana Properties are mainly attributed to operating losses and financing costs of Harbour Mall Sandakan and Four Points by Sheraton Sandakan Hotel, together with operating losses and financing costs of the City International Hospital, which is in its early operational stage. The losses in Aseana have been mitigated by profit from the sale of vacant plots of land at the International Healthcare Park (“IHP”) as well as increased sales at both SENI Mont’ Kiara and Tiffani. The devaluation of Ringgit Malaysia against the United States Dollar, the financial reporting currency of Aseana, has also resulted in Aseana recording unrealised foreign exchange losses of US$13.2 million for FY2015.

With the completion of the Two-Call Rights Issue with Warrants on 1 July 2014, the issued and paid up capital of the Ireka was enlarged to RM170,872,050. This Rights Issue with Warrants exercise had generated gross proceeds of RM37,022,000 and such sum had been fully utilized as working capital during the financial year under review.

As part of a long-term succession plan, there has been a reorganization at the top level management of the Group during the year. Mr. Lai Voon Hon has taken over the position of Group Managing Director in April 2015 from Datuk Lai Siew Wah, who has assumed the position of Executive Chairman upon the retirement of Tuan Haji Abdullah Yusof. Ms. Monica Lai replaces Datuk Lai Foot Kong as the Group Deputy Managing Director, with Datuk Lai Foot Kong assuming the position of Ireka Group’s Advisor. There have also been a number of new appointments at the senior management level, with each new member bringing with them a wealth of working experience and knowledge in their respective field to further strengthen the Group.

Shareholders of Aseana Properties supported Aseana Properties Board’s recommendations to adopt a new divestment policy to orderly realise its assets and subsequent capital return to its shareholders, and voted against the Discontinuation Resolution at its Extraordinary General Meeting and Annual General Meeting on 22 June 2015.

Under the divestment policy, Aseana will not make new investments and will begin to realise its assets progressively in a controlled, orderly and timely manner over the next three years. Aseana is now in various stages of negotiations for disposals of most of its assets including those in Vietnam. Vietnam’s economy has made a turnaround with its GDP growing at 6.0% in 2014, surpassing the Vietnamese government’s target of 5.8%. The continued macroeconomic stability which has helped underpin growth in Vietnam, will augur well for Aseana’s divestment activities going forward.

With Aseana embarking on its new divestment policy, the shareholders of Aseana, including Ireka, will see regular capital distributions from Aseana, expected to be twice annually over the next three years.

The Malaysian economy has defied the slide in commodities and crude oil prices to grow at its fastest pace since 2010, up 6.0% in 2014 compared with 4.7% in 2013. The positive growth was largely driven by the continued strength of domestic demand in tandem with the improvement exhibited by external trade performance. However, the steady growth has been interrupted by the depreciation of the Ringgit after the Government adjusted its economic targets to cope with sliding oil prices. The Ringgit has depreciated by 6.1% to RM3.4950 against the US Dollar during 2014 as a whole. The lackluster performance of the Ringgit was also partially caused by the strengthening of the US Dollar in anticipation of the Federal Reserve raising interest rates, as well as the concerns over the political instability and the state of Malaysia’s public finances.

In August 2015, the Ringgit sunk to its seventeen-year low against the US dollars as a result of both internal and external factors outlined above. Despite the current economic headwinds, Malaysia jumped 5 notches to 6th position in this year’s Baseline Profitability Index (“BPI”), a ranking of destinations of attractiveness for foreign investors, published by the Foreign Policy Magazine. The ranking, which covered 110 countries across six continents, reaffirms Malaysia’s position as an attractive profit centre in the region for investors.



The 11th Malaysia Plan unveiled in 2015 will drive the expansion of the construction sector through major capital expenditure projects, being the Government’s Economic Transformation Programme (“ETP”) and the Public-Private Partnership (“PPP”) mega-projects, such as the Tun Razak Exchange, Klang Valley Mass Rapid Transit (“KVMRT”) and Iskandar Malaysia. In 2014, the construction sector accounted for 3.9% share in the overall GDP growth of Malaysia and registered a total growth of 11.6% year-on-year mainly due to stronger growth in both the residential and non-residential sub-sectors.

Despite being affected by the implementation of the Goods and Services Tax (“GST”) in April 2015, coupled with the cooling measures to curb property speculation, it is expected that the country’s construction industry will chalk up its fourth consecutive year of double-digit growth in 2015. The Malaysian government has reiterated its commitment to continue with the development expenditure announced in the Budget 2015 such as the MRT Line 2, LRT 3 and the Kuala Lumpur-Singapore High-Speed Rail project.

For year 2015 to date, Ireka Engineering & Construction Sdn Bhd (“IECSB”) had successfully completed two significant projects, namely the Kasia Greens, double-storey super-link houses in Nilai and the Imperia Puteri Harbour, high-end serviced apartment project in Nusajaya for UEM Land Berhad. In addition, IECSB is targeting to handover the Solstice @ Pan’gaea in Cyberjaya by the first quarter of 2016.

Aside from these notable successes, IECSB has secured a new contract during the year, a Grade A office building work awarded by KL Eco City Sdn Bhd with a total contract sum of RM276.7 million. The Group’s construction order book stood at about RM1.4 billion, with approximately RM760.4 million still outstanding as at 30 June 2015. Contracts such as the MRT Elevated Viaduct Civil Works Package V7, Solstice @ Pan’gaea in Cyberjaya, KL Eco City Residential Tower 1 and The RuMa Hotel and Residences are still underway. In supporting the Group’s Real Estate Division activities, IECSB has also planned for a number of internal projects which will take place over the next few years with a total contract sum of approximately RM640.0 million.

Moving forward, IECSB will continue to actively seek opportunities to replenish its order book. However, IECSB will be exercising extra caution in taking on construction contracts amidst the poor sentiments of the property market in Malaysia.



The Malaysian property market has slowed down noticeably in 2014, in the wake of cooling measures implemented under the 2014 budget by the Government, such as the prohibition of the Developer Interest Bearing Scheme (“DIBS”), the increase in the Real Property Gains Tax (“RPGT”) and the loan-to-value ratio. With the implementation of Goods and Services Tax (“GST”) back in April 2015, buyers will likely adopt a “wait-and-see” approach for at least the next nine to twelve months. Nevertheless, the overall performance of the property market in Malaysia is still resilient and has made a marginal rebound in terms of value and volume in 2014 from a year earlier, led by residential real estate transactions. Moving forward, Malaysia’s property market is poised to see interest not only locally but from foreign parties capitalising on the weak Ringgit.

According to the National Property Information Centre (“NAPIC”), Malaysia registered a rise of 7.0% in transaction value at RM163.0 billion while volume increased 0.8% to 384,060 transactions in year 2014. The residential segment led with a 50.4% share in terms of value, followed by commercial properties at 19.5%. In terms of volume, the residential segment led the property market with a 64.4% contribution, followed by the agricultural segment at 18.8% and commercial properties at 9.3%.

On its property front, Ireka Group has in 2014 introduced its new brand product, zenZ for the mid-market properties. After creating the very successful i-ZEN brand that caters for the upper market, the Group is now venturing into the mid-market properties in Nilai and Kajang. The essence of zenZ is embodied in the 5E principles which are Economical, Evolutionary, Efficient, Essential and Eco-conscious. In Nilai, the first phase of development on the residential land is Kasia Greens consisting of 142 units of super-link houses. Kasia Greens was officially launched in June 2013 and the development has now been completed and successfully handed over to the buyers in June 2015.

Second phase of Nilai land development, consisting of 6 parcels of lands measuring 30.6 acres, will be developed into courtyard apartments, condominiums, town villas and commercial centre. The sales launch of the courtyard apartments, known as dwi@Rimbun Kasia, was initially planned for the fourth quarter 2014. However, the launch date has now been postponed to end of 2015 due to delays in obtaining approvals from the authorities. The project, dwi@Rimbun Kasia, consists of a 9-storey, 328 units apartment block with sizes ranging from 650 square feet to 980 square feet.

Meanwhile, the sales launch of the ASTA Enterprise Park, Kajang (formerly known as Kajang Industrial Development) has been delayed due to authorities’ approvals and is now planned for end of 2015. Located at a thriving neighbourhood south of Kuala Lumpur, this 31.5 acres of freehold development, will consist of semi-detached and detached light industrial factories. The design of the units emphasizes on multi functionality and versatile utilisation to cater for the total industrial needs of companies.

Detailed development planning and approvals are currently underway for Kajang Residences (formerly known as Kajang Commercial Development) as well as for the Kiara Residences project. Kajang Residences will be positioned as a stylish and trendy new urban resort of serviced residences in the thriving area of Kajang. The Mont’ Kiara Residences is a mixed development comprising of serviced residences and commercial properties in the heart of the established and exclusive Mont’ Kiara enclave. The Group is optimistic that these upcoming projects will do well despite the slowdown in the property sector as they are situated in established neighbourhoods and addresses.

As for properties under Aseana, SENI Mont’ Kiara (“SENI”) bagged the prestigious World Silver Award at the International Real Estate Federation (“FIABCI”) World Prix d’Excellence Awards 2014 in the residential high rise category in May 2014. On a similar note, the Aloft Kuala Lumpur Sentral Hotel (“Aloft”) was awarded the Gold Winner of FIABCI World Prix d’Excellence Awards 2015 in the hotel cateogory in May 2015. This award represents the second time that a hotel built by Ireka has been recognised internationally for its hotel development - the first being Westin Kuala Lumpur in 2006. The award is a true testimony of the Group’s standing as one of the leading hotel developers in the world. Winning the much coveted FIABCI World award will also place Ireka and its associate company, Aseana, in the international spotlight, and will inspire the Group to set new benchmarks in future projects.



i-Tech Network Solutions Sdn Bhd (“i-Tech”) had a disappointing year in FY2015, recording lower revenues due primarily to the postponement of a number of large projects for clients in the Oil & Gas industry. This, coupled with a highly competitive IT market, hampered growth plans. However, the company’s gross profit margin increased due to better control of costs and continued support from long term clients.

i-Tech’s “green” data centre in Mont’ Kiara, branded as SAFEHOUSE, has continued to add to its stable of clientele in the face of an oversupply of data centres in the country. SAFEHOUSE has focused the marketing of its data centre on offering Recovery-as-a-Service (“RaaS”) solutions and becoming more innovative with product offerings to differentiate itself from its competitors. Any success, small or otherwise, is testament to the hard work performed by the team in the marketing of SAFEHOUSE. Our boutique data centre was built with high security, high availability, high density and high efficiency, state-of-the-art solutions and has obtained ISO/IEC 27001:2005 Certification for Information Security Management System for the Provision of Data Centre Services from the Certification Body of TÜV SÜV Management Services GmbH.

The Malaysian IT market is expected to be the only one in Asia Pacific where the proportion of hardware spending still outstrips spending on software and services, but this is expected to change as organizations consolidate their hardware. The major driver behind the steady growth has been the Malaysia Government and its various initiatives to encourage the adoption of Information and Communications Technology (“ICT”) including the Digital Malaysia Programme that seeks to transform the nation into a fully developed economy by 2020. The highly marketed cloud-based solutions offered by international players are expected to affect the IT hardware and co-location market locally. However, i-Tech is confident that our service and expertise are capable of competing with international players with similar solutions.

iTech ELV Solutions Sdn Bhd’s (“iTech ELV”) sales revenue dipped slightly in FY2015 compared to FY2014. iTech ELV has been cautious in its approach and will only take on work for ‘blue chip’ clients. iTech ELV however remains profitable in FY2015. iTech ELV is a certified Electrical Class A license Contractor by Suruhan Tenaga offering low voltage (“LV”) electrical services namely switch gear, transformer, LV switch board to structured cabling, building automation, security access systems and audio-visual systems. iTech ELV will be aggressively looking to replenish its order book over the next twelve months.

i-Tech Network Solutions (Vietnam) Company Limited (“ITV”) continues to provide IT and network services to City International Hospital, a Parkway operated hospital in Ho Chi Minh City. In the coming years, ITV intends to further extend its business in the growing Vietnam market.

For all three core businesses, FY2015 was a challenging year. However, Ireka is confident that it will remain steadfast and focused on growth of its core businesses, which are all trending in the right direction.

Group Managing Director
28 August 2015