Management Discussion & Analysis



For the financial year ended 31 March 2013 (‘FY2013’),the Ireka Group recorded total revenue of RM329.93 million, a decrease of 23.3% compared to the financial year 2012 (‘FY2012’). The Infrastructure Division, through its construction activities, continued to be the main contributor of the Group’s turnover, accounting for approximately 93% of the Group’s total revenue. The Real Estate Division, through its development management services provided to Aseana Properties Limited ( a 23.07% associate of Ireka Corporation Berhad ) and the Technologies Division are the contributors to nearly all of the remaining of the Group’s total revenue.

The Group recorded losses of RM40.21 million in FY2013, compared to profits of RM10.40 million in FY2012, 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 pre-opening expenses and operating losses from Harbour Mall Sandakan and Four Points by Sheraton Sandakan which are at an early operational stage, coupled with a reduction in the fair value of Aseana Properties’ holding in an equity investment.

The general business environment for Malaysia in FY2013 had remained relatively robust despite the continued subdued global market condition. The Malaysian gross domestic product (‘GDP’) grew moderately at 5.6% in 2012 largely driven by both private and public domestic consumption. The domestic consumption and investment in Malaysia continues to be driven by projects under the Government’s Economic Transformation Programme (‘ETP’) which includes the implementation of a mass rapid transit system in Kuala Lumpur. In the run-up to Malaysia’s 13th General Election in May 2013, the capital markets in the country remained buoyant with strong buying interests in large initial public offerings.

Vietnam recorded GDP growth of 5% in 2012, the lowest level of growth recorded since 1999. Stabilization measures introduced by the Government and the continuing tightening of monetary policy have successfully moderated inflation in 2012 to 9.2% compared to 18.1% in 2011. However, credit tightening measures have resulted in reduced lending and exposed Vietnamese banks to rising levels of non-performing loans (‘NPL’) in particular state-owned companies, that have relied heavily on debt to support their growth over the last decade. The much-awaited Vietnam Asset Management Company (‘VAMC’), a national debt restructuring agency, has commenced operations in July 2013. The effectiveness of VAMC in dealing with the worsening NPL situation remains to be seen, but it underlines the commitment from the Government to restructure the economy.


In June 2013, Ireka Corporation Berhad (the ‘Company’ or ‘Ireka’) announced that it had received an offer from its major shareholders to take the Company private via a selective capital reduction method. If the privatisation exercise is successful, the major shareholders will own 100 percent of the Company, and the Company will be subsequently delisted from Bursa Malaysia Securities Berhad.

Among the reasons cited for the proposed privatisation exercise includes:

  • Low liquidity and thin trading of the Company’s shares over the past few years, hence affecting its overall performance. As a result, the Company has not been able to capitalise on the benefit of being a listed company, which crucially includes the ability to raise funds from the public market.

  • The challenging environment of the construction industry and less than satisfactory performance of the Company’s investment in Aseana Properties will likely hamper the Company’s ability to continue with a healthy dividend policy moving forward.

The performance of the Group in FY2013 highlights the challenging operating environment that the Company is facing at this point in time. The privatisation offer signifies the major shareholders’ confidence in the long-term prospects of the Company’s business and investments. However, the major shareholders are also cognisant that the full potential and value of the Company will not be realised unless there is significant repositioning in the medium term. The major shareholders believe such repositioning activities will be carried out more effectively as a private company. Regardless of whether it is a public or private company, Ireka will continue to stay true to its founding principles of trust, integrity and competence that have allowed it to grow and flourish over the past 46 years.


The construction sector remained robust and expanded at a rate of 18.5% in 2012, largely supported by the implementation of major infrastructure projects, particularly the Sungai Buloh-Kajang Line MY Rapid Transit (‘MRT’). The construction sector has always been a strong driver of growth for the Malaysian economy and currently contributes approximately 3.6% to the country’s gross domestic product. (Source: National Statistic Department Q1 2013 GDP report)

The construction sector is anticipated to record a strong growth in 2013 with the implementation of the various projects under the banner of the Government’s Transformation Programme and Economic Transformation Programme. These projects are expected to proceed smoothly over the course of the year into 2014 which includes the LRT line extension, Phase 2 of MRT, Kuala Lumpur International Airport 2 and The KL Metropolis development.

During FY2013, IECSB had successfully completed a number of key construction projects. Construction works at Harbour Mall Sandakan and Four Points by Sheraton Sandakan Hotel were completed in March 2012 and May 2012 respectively. Following that, the main building works for Kuala Lumpur Sentral office towers were completed in November 2012, and shortly after that the adjacent Aloft Kuala Lumpur Sentral Hotel (‘Aloft Hotel’), and its interior fit-out works were completed in March 2013.

In March 2013, Ireka Engineering & Construction Vietnam Company Limited (‘IECVCL’), a wholly owned subsidiary of Ireka also successfully completed the main building works package of the City International Hospital in Ho Chi Minh City, Vietnam.

As at June 2013, the Group’s total order book stood at about RM734.04 million, with approximately RM545.11 million remaining outstanding. In FY2013, IECSB successfully secured four new projects with total contract sum of approximately RM613.24 million to replenish its order book. These are the MRT Elevated Viaduct Civil Works Package V7, Imperia Puteri Harbour Serviced Apartments and Office in Johor, Solstice @ Pan’gaea in Cyberjaya and Kasia Greens in Nilai. These projects will be completed over the course of the next two and half years.


In 2012, the real estate activities in Malaysia remained fairly robust with 427,520 transactions worth RM142.84 billion compared with 430,403 transactions worth RM137.83 billion in 2011, representing a marginal drop of 0.6% in the total transaction volume and 3.6% increase in total transactions value.

The residential sector continues to drive the real estate market in Malaysia, accounting for over 63.8% of the total volume and 47.4% of total value of transactions recorded in 2012. Both the rental rates and market price for the retail property market improved towards the second half of 2012 and remained stable in Quarter 1, 2013. As for the offices, the market price and rental rate remained stable throughout 2012 and to date. The retail segment in particular continued to see vibrant activities with RM4.6 billion initial public offering and listing of IGB Real Estate Investment Trust in September 2012, the largest REIT listed in Malaysia by asset value after the listing of Pavilion REIT in 2011. IGB REIT is the owner of the Mid Valley Megamall, Kuala Lumpur’s second largest shopping mall and The Gardens Mall which is part of the Mid Valley City. Occupancy levels of prime retail malls in the Klang Valley have continued to stay above 85%. The office segment has remained relatively stable in 2012. However, the occupancy levels and rental rates in the Klang Valley are expected to come under pressure in 2013 with further supply of more than 7 million square feet coming on-stream.

At the end of 2012, the National Property Information Centre’s House Price Index indicated a 11.8% increase compared to the previous year across Malaysia, representing a continual trend from the previous year. On top of the ‘responsible lending guidelines’ introduced in 2012, Bank Negara in July 2013 announced a maximum tenure of 35 years for financing granted for the purchase of properties as additional measures aimed at avoiding excessive household debt. These measures are expected to have a moderating effect on property transactions in Malaysia, particularly in the higher end segment of the residential property market.

In FY2013, Ireka Development Management Sdn Bhd (‘IDM’), as the development manager for Aseana Properties, has achieved another milestone with the completion and official opening of the Sandakan Harbour Square (‘SHS’) properties, consisting of the Harbour Mall Sandakan and the Four Points by Sheraton Sandakan Hotel in October 2012. The SHS properties are key components of Aseana Properties’ portfolio. IDM will continue to play an active role in managing and nurturing the SHS properties in preparation for realisation when the opportunity arises.

The year to date also saw IDM managing the completion of Kuala Lumpur Sentral Office Towers in November 2012, followed by the completion of the Aloft Hotel in March 2013. The Aloft Hotel was subsequently opened for business in March 2013.

n January 2013, The RuMa Hotel and Residences (‘The RuMa’), a joint venture mixed development project between Aseana Properties and Ireka, located on Jalan Kia Peng in Kuala Lumpur City Centre, obtained its final development approvals. The RuMa development consists of 253 units of hotel suites and 200 units of serviced residences. Pre-launch marketing and sales of the hotel suite units and residences commenced in March 2013 in various countries and commendable sales were recorded as to-date.

In Vietnam, IDM has managed the completion of construction works for the City International Hospital (‘CIH’), the flagship development at the International Hi-Tech Healthcare Park in March 2013. The hospital is now undergoing testing and commissioning by the hospital operator, Parkway Pantai Limited and is expected to open for business in Quarter 3 of 2013. 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 Phase 1 of the Waterside Estates, consisting of 37 units of riverside villas, to 2014.

Following the return of Ireka Group into direct property development activities in Malaysia in FY2012, Ireka has been progressing well with its development projects. Construction works for the first phase of development for the residential land in Nilai, i.e. Kasia Greens, are currently underway. Kasia Greens consists of 142 units of super-linked houses and was officially launched in June 2013. As at to-date, Kasia Greens has achieved a sales status of approximately 92%. Second phase of Nilai land development, consisting of 6 parcels of lands measuring 30.56 acres, will be developed into courtyard apartments, condominiums, town villas and a commercial centre. The sales launch of the courtyard apartments is planned for 2014.

In the meantime, detailed development planning and approval is currently underway for both the Kajang Industrial Development and Kajang Commercial Development with expected launch dates in 2014 and 2015 respectively.


i-Tech Networks Solutions Sdn. Bhd. (‘i-Tech’) grew its sales revenue by 147% in FY2013 compared to the previous year, helped significantly with the completion of networking and systems integration projects for key clients during the period.

i-Tech’s ‘green’ data centre in Mont’ Kiara, branded as SAFEHOUSE, was officially launched in late October 2012. SAFEHOUSE is now open for business and we are proud to have managed to secure a number of clients in its first few months of operations. We are continually marketing SAFEHOUSE locally and internationally as a 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.

The Government projects that the data centre industry will contribute RM2.4billion to Growth National Income (‘GNI’) by 2020. With the Government’s impetus to make Malaysia a regional ICT and data centre hub, we are cautiously confident that i-Tech will be able to participate in this as an integrated ICT player, recognizing that the business environment will continue to be very competitive.

iTech ELV Solutions Sdn. Bhd. (‘iTech ELV’) has once again performed very well, improving on its revenue compared to 2012. Revenue grew 56% during the 2013 period. iTech ELV is a specialist contractor offering installation services for extra low voltage components such as structured cabling, building automation, security access control systems, amongst other specialities. In late 2012, iTech ELV was also approved with a Class A License as an electrical contractor with Suruhanjaya Tenaga, which now allows the company to undertake electrical works. iTech ELV hopes to be able to complement the building construction projects undertaken by the Group’s Infrastructure and Real Estate Divisions.

Another significant milestone for the i-Tech group of companies is obtaining our Investment License from The People’s Committee of Ho Chi Minh City, Vietnam in November 2012. i-Tech Network Solutions (Vietnam) Company Limited officially started operations thereafter. We secured an outsourcing contract with the City International Hospital in Ho Chi Minh City and played a part in completing its networking infrastructure and systems integration work in May 2013.

The Technologies Division will continue to not only tap into the synergies between the Infrastructure and Real Estate Divisions but also to continue to develop and strengthen relationships with customers and suppliers. We are also driven to develop new relationships and to find new products and services to broaden our business foundations and portfolio.

Datuk Lai Siew Wah
Group Managing Director
29 August 2013