Management Discussion & Analysis



For the financial year ended 31 March 2014 (‘FY2014’), the Group recorded total revenue of RM289.7 million, a decrease of 12.2% compared to the FY2013. The Infrastructure Division through its construction activities remain as the major revenue contributor for the Group, accounting for approximately 80.1% of the Group’s total revenue. The Real Estate Division, through development management services provided to Aseana Properties Limited, a 23.07% associate of Ireka Corporation Berhad and the Technologies Division are the contributors to the remaining of the Group’s total revenue.

The Group recorded losses of RM27.3 million in FY2014, compared to losses of RM40.2 million in FY2013, largely due to negative results of Aseana Properties Limited (‘Aseana Properties’) and operating losses of Ireka Engineering & Construction Sdn. Bhd. (‘IECSB’). The losses from Aseana Properties are mainly attributed to operating losses from Harbour Mall Sandakan and Four Points by Sheraton Sandakan, pre-opening expenses and operating losses from Aloft Kuala Lumpur Sentral Hotel as well as the City International Hospital which is in early operational stage.

The Malaysian economy grew at a slower pace in 2013, with gross domestic product (‘GDP’) grew moderately at 4.7% compared to the 5.6% growth recorded in 2012, largely driven by growth in domestic demand. Domestic demand remained resilient throughout the year, led by robust private sector activity on the back of public sector spending on large infrastructure projects. However, growth was tempered by a series of measures implemented by the Malaysian government to ease concern on the national budget deficit which include subsidy cuts to petrol and fuel, resulting in rising of the inflation rate at an annual average rate of 2.1% for 2013, highest level since June 2011.

Vietnam registered GDP growth of 5.4% in 2013, slightly below the target of 5.5% growth but higher than the 5.3% growth recorded in 2012. The continuing tightening of monetary policy have successfully moderated inflation further in year 2013 to 6.6% compared to 9.2% in year 2012, the lowest rise in the last decades. Positive outcome was seen from the Government’s successful economic restructuring plans and efforts aimed to boost investment efficiency.

The Government is now focusing on restructuring the banking system and state-owned enterprises, as well as attracting foreign direct investment (‘FDI’). FDI continues to be a strong driver of Vietnam’s growth with US$21.6 billion being recorded in year 2013. Since its establishment in year 2013, the Vietnam Asset Management Company (‘VAMC’), a national debt restructuring agency, has successfully swapped VND39.0 trillion (US$1.8 billion) worth of bad debts from 35 banks, surpassing its target for 2013.


In June 2013, the major shareholders of Ireka Corporation Berhad (the ‘Company’ or ‘Ireka’) proposed to privatise the Company via a selective capital reduction and repayment exercise on the rationale that the shares had been thinly traded and the market price had been languishing below the par value of RM1.00. This has made it difficult for Ireka to undertake any fund raising activities through the capital markets, and the Company has hence not benefited from its listed status.

Subsequently, during the Extraordinary General Meeting (‘EGM’) of the Company in February 2014, the minority shareholders voted against the major shareholders’ proposed offer to take the Company private. The result of the EGM underlined the belief and commitment of the minority shareholders to the future growth plans of Ireka.

Following the unsuccessful privatisation exercise, the Company conducted a two-call rights issue with free detachable warrants of 56,957,350 number of shares at a first call price of RM0.65 per rights share, and a second call at RM0.35 per rights share. The first call was satisfied via cash call from shareholders and the second call via capitalisation of the Company’s share premium reserve. The rights issue exercise was completed in July 2014, with the issue being approximately 13.4% oversubscribed, and the Company successfully raising approximately RM37.0 million cash. The over-subscription of the rights issue again is a testament of the support and commitment of the shareholders to the future prospects of Ireka.


The construction sector remained strong and grew at a rate of 10.9% in year 2013, largely driven by an influx of infrastructure projects and the robust performance in residential segment underpinned by the construction of luxury and high-rise properties. The construction sector has always been a strong driver of growth for the Malaysian economy and currently contributes approximately 3.8% to the country’s GDP. (Source: National Statistic Department 2013 GDP report)

2014 is set to be a busy year for the construction sector, driven by both private and government projects, particularly the Economic Transformation Programme (‘ETP’) and continued investments and infrastructure development projects under the 10th Malaysia Plan. Its growth is also supported by the progress completion of pre-awarded construction work, particularly the Klang Valley Mass Rapid Transit (‘KVMRT’) Line 1. Several other mega infrastructure and property development projects are also expected to be launched in the second quarter of 2014, including the RM5.9 billion West Coast Expressway and also the Phase 1 of Langat 2 water treatment plant. Positive flows can also be expected with the appointment of project delivery partner for the RM25.0 billion KVMRT Line 2, RM5.0 billion Warisan Merdeka Tower and also the Kwasa Damansara Township Development.

In addition to the current construction works for MRT Elevated Viaduct Civil Works Package V7, Imperia Puteri Harbour Serviced Apartments and Office in Johor, as well as Solstice @ Pan’gaea in Cyberjaya, the Group has secured two new projects in FY2014 to bring the total order book to RM1.1 billion, of which approximately RM875.7 million was still outstanding as at June 2014. These two new projects are high-end building projects with a total contract sum of RM547.7 million, namely the KL Eco City Residential Tower 1 and The RuMa Hotel and Residences. The KL Eco City Residential Tower 1 project which is awarded by SP Setia Berhad, once completed, will be the tallest residential building in the Klang Valley at 60-storey high. We are proud and honoured to be a trusted delivery partner for some of the most prominent developers in Malaysia.

As in previous years, the priority for the Group is to ensure timely delivery of all the construction projects. Alongside that, the Group will actively seek opportunities to grow its order book. Based on the Group’s track record and experience, the targeted projects will include commercial and Government buildings, infrastructure works as well as high-end residential buildings.


Malaysia’s property transactions in value terms grew by 6.7% in 2013, with residential properties continuing to spearhead demand with a 64.6% share of the total transactions. However, the volume of property transactions fell by 10.9%, recording 381,130 transactions in 2013, as opposed to 427,520 in 2012.

The property market was sustained by the prevailing low interest rate environment for the earlier part of the year but tapered off in the later part due to Bank Negara Malaysia’s counter measures, such as the application of 70% loan-to-value ratio on the third housing loans as well as guidelines on responsible funding.

The National Property Information Centre’s House Price Index has indicated a 11.6% increase at the end of 2013 compared to previous year across Malaysia, representing a continual trend from the previous year. However, this is contrasted against lesser number of transactions being recorded in 2013 which indicates a sign of a slowdown in the Malaysian property market. For a large part of year 2013, the market was affected by the uncertainty over the outcome of the 13th General Election, with investors opting for a more cautious ‘wait-and-see’ approach. Furthermore, the Malaysian government has in its 2014 Budget introduced a series of measures to curb property speculation such as stricter Real Property Gains Tax (‘RPGT’) rules, the abolishment of the Developer Interest Bearing Scheme (‘DIBS’) and also the increase in the minimum price for foreigners to purchase properties in the country from RM500,000 to RM1 million. In view of these stringent measures, there are imminent uncertainties on the outlook of the Malaysian property market over the next few years.

In FY 2014, Ireka Development Management Sdn Bhd (‘IDM’), the development manager for Aseana Properties, saw the official opening of City International Hospital (‘CIH’), the flagship development at the International Hi-Tech Healthcare Park, Vietnam in January 2014. CIH is managed by Parkway Pantai Limited. Due to the challenging economic and property market conditions at this point in time for the high-end property market in Vietnam, IDM and Aseana Properties have decided to delay the launching of he Phase 1 of the Waterside Estates, consisting of 37 units of riverside villas to a later date, pending a broader recovery of the market.

The year to date also saw the commencement of building work for The RuMa Hotel and Residences (‘The RuMa’), another project under the management of IDM. The RuMa is a joint venture mixed development project between Aseana Properties and Ireka located on Jalan Kia Peng in Kuala Lumpur City Centre which consists of 253 units of hotel suites and 199 units of serviced residences. Construction of the main building commenced in October 2013 with completion targeted for 2017. The RuMa has achieved commendable sales progress since its launch in March 2013, given the current challenging high-end property market.

Ireka Group is making good progress with its development projects following the Group’s return into direct property development activities in Malaysia. The first phase of development on the residential land in Nilai, being Kasia Greens, was officially launched in June 2013. Kasia Greens consists of 142 units of super-linked houses, and has achieved 100% sales as at to-date. Construction works is currently underway and completion is targeted for end of 2014. 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, is planned to take place in the fourth quarter of 2014. dwi@Rimbun Kasia consists of a 9-storey, 328 units apartments 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) is expected to take place in the fourth quarter of 2014. Located at a thriving neighbourhood south of Kuala Lumpur, this 31.5 acres of freehold development consists of 57 units of semi-detached and detached light industrial factories. The design of the units emphasizes on multi functionality and versatile utilisation to cater for total industrial needs of companies.

Detailed development planning and approval is currently underway for Kajang Sentral Residences (formerly known as Kajang Commercial Development) and launch is expected in 2015.


i-Tech Network Solutions Sdn. Bhd. (‘i-Tech’) has had a mixed year. The Company’s sales revenue dropped by 26% in FY2014 compared to the previous year, due to delays in the early part of this year of a couple of implementation of networking and systems integration projects for a few clients, coupled with a slowdown in the hardware market.

i-Tech’s ‘green’ data centre in Mont’ Kiara, branded as SAFEHOUSE, managed to secure a number of new clients during this reporting period which is a testament of the hard work put in by the team in the marketing of SAFEHOUSE locally and internationally. Our boutique data centre offering not only co-location and disaster recovery services, but also delivering high availability, high density and high efficiency, state-of-the-art solutions also 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 in March 2014. This, again, is a testament of the quality and integrity of the services SAFEHOUSE offers our clients.

The Malaysian IT market is expected to continue its strong development over the medium term due primarily to supportive Government policy in the sector. There will be a likely slowdown in the desktop and notebook market but sales of tablets will likely compensate for this in the short-to-medium term. Corporate customers are more hesitant to implement hardware refresh projects as a result of the ongoing global uncertainty. However, there will be areas of strong growth including security software and services, as well as outsourcing and cloud computing; and these are areas where i-Tech will look to capitalize on.

iTech ELV Solutions Sdn. Bhd.’s (‘iTech ELV’) sales revenue dropped considerably in FY2014 due in part to lower pipeline of projects and delays in the implementation of a couple of projects. iTech ELV was however profitable in FY2014. iTech ELV is a specialist contractor offering installation services for extra low voltage components such as structured cabling, building automation, security access control systems and audio-visual components. iTech ELV will be aggressively looking to replenish its projects pipeline over the next 12 months.

i-Tech Network Solutions (Vietnam) Company Limited (‘ITV’) continues to support City International Hospital in Ho Chi Minh City. ITV also managed to secure a couple of networking and systems integration projects for an international company in FY2014. ITV’s business focus in Vietnam is primarily to continue to fulfill its outsourcing contract with City International Hospital and to look to secure networking and systems integration projects with international companies operating in Vietnam.

The Technologies Division will continue to heavily market SAFEHOUSE locally and internationally using this as a platform to evolve into a managed services company thereby reducing its risk from the volatile and extremely competitive hardware and software market segment of the IT industry.

Datuk Lai Siew Wah P.G.D.K.
Group Managing Director
28 August 2014