By Jose Barrock
In the first of a series of articles, KiniBiz traces Prasarana’s checkered past and looks at the problems that face the government company. Shahril Mokhtar, the chief executive officer of Syarikat Prasarana Negara is 40, and has clearly aged a lot since KiniBiz last saw him. But then he is in the hot seat, with the government spending billions of ringgit on rail extensions, after having spent billions more on the acquisition of rail-related assets. Shahril also defends the move to take a stake in property development ventures to increase income.
In October this year, it will be almost three years since Shahril Mokhtar took over the reins at Minister of Finance Inc-owned Syarikat Prasarana Negara.
And admittedly the going has not been easy.
“It feels more like 10 years… this (public transport) is a business where people are not appreciative. I always compare this business with the airlines business. I travel by air quite a bit. Delays and their OTP (on time performance) can be bad, but people don’t grumble or make as much noise.
Shahril Mokhtar
“In our case, if during peak hours we are five minutes late, the tweets that come out are not very flattering,” Shahril said during an exclusive interview with KiniBiz.
Despite the many frustrations, he has made considerable changes at Prasarana, and is setting the foundation for the company which clearly started out on the wrong foot.
While he does not talk of Prasarana’s past, a chunk of Shahril’s problems stem from decisions made way before his stint at the company, a time when corporate Malaysia was recovering from the aftermath of the financial crisis in the late 90s, and when many of the corporate deals were opaque in nature.
Prasarana’s colourful past
Prasarana was incorporated in 1998 by the Ministry of Finance to facilitate, undertake and expedite public infrastructure projects.
The company ended up owning two LRT lines, a monorail business, and a bus service provider Intrakota Sdn Bhd at a cost of almost RM9 billion, after the various companies ran into financial difficulties.
Star (Sistem Transit Aliran Ringan Sdn Bhd) LRT system which was renamed the Ampang Line cost RM3.3 billion, while the takeover of the Putra (Projek Usahasama Transit Ringan Automatik Sdn Bhd) system renamed the Kelana Jaya Line cost about RM4.5 billion. Both were taken over in 2002. Then Prasarana forked out about RM124 million to DRB Hicom for bus service provider Intrakota in 2004.
In 2007, Prasarana assumed the RM882 million debt which KL Monorail Systems Sdn Bhd owed to Bank Pembangunan, effectively making Prasarana the owner of the rail transport system, after KL Monorail went belly up under huge debts.
A bailout
Many viewed Prasarana’s takeover of the LRT and other assets as a bailout, given that most of the companies operating the assets were linked to politically connected individuals.
The National Audit Report in 2008 went so far as to question Prasarana’s acquisition of certain assets such as KL Infrastructure Group (KLIG) which had a hand in the monorail business.
“Based on the directors’ resolution dated Feb 21, 2002, Prasarana bought 52 million shares valued at RM26.52 million. This was equivalent to 10% equity in KLIG. Auditors could not find the justification for this purchase as KLIG was a company in financial trouble and had failed to complete the monorail project,” the auditor-general’s report read.
In five years, or by 2007, the shares in KLIG acquired for RM26.52 million in 2002, were only worth RM6.76 million.
“It is the view of this audit, that the share acquisition was a loss-making investment for the government.”
Another thorn in Prasarana’s side was the acquisition of land for the building of bus depots. It was pointed out in the 2008 Auditor General’s report that Prasarana, had forked out between 10% and 50% higher for three pieces of land to be used as bus depots.
“On July 7, 2008 the board of directors approved a RM33.25 million budget based on RM45 per square foot for a piece of land measuring 6.86 hectares in Balakong, Cheras to build a bus depot.
“The auditors could not determine the justification for the budget which was 10.8% to 50% higher than the Land Office and Valuation Department’s estimates and two private valuation companies in February 2008,” the report read.
The report added that the land was acquired from the owner of the office building rented by Prasarana, it added.
Then in October 2009, a year later, the National Audit Report further condemned Prasarana and warned of the likelihood of the company not being able to repay its bonds of RM7.1 billion which had staggered payments from 2011 to 2023.
Prasarana’s debt levels are high. For its financial year ended December 2012, Prasarana suffered an after tax loss of RM776.2 million from RM464.5 million in sales. The company had negative reserves of almost RM3 billion as at end 2012.
As at end 2012, while the company’s long-term assets were at RM11.2 billion, and current assets were at RM2.5 billion, its long term borrowings stood at a whopping RM11.6 billion and short term debts at RM432.1 million.
However Prasarana had share capital of RM4.6 billion, which would indicate that the company had net shareholders’ funds of RM1.7 billion.
Shahril therefore does have his hands more than full, turning around a giant with such a chequered past.
“Put it this way, look at our P&L (profit and loss accounts), it is very clear…about RM400 million goes for depreciation, and about RM350 million in financing costs, so about RM750 million is wiped out…it’s difficult,” Shahril said.
Perhaps there is a reason why a 40-year old was put at the helm of the company…to ensure that the arduous change which is likely to take a long time, does actually take place, irrespective of how long it takes.
Doing things differently
Shahril to his credit has been changing things at the company, slowly but surely. For the past year the rail arm has been profitable, and strategies have changed dramatically.
While many of the changes are operational and involve fine tuning processes, one change has stuck out, and could result in a pretty significant difference to Prasarana. Via its Prasarana Integrated Development Sdn Bhd or Pride, Prasarana will soon be an owner of commercial property.
So far four contracts have been inked with Bina Puri Holdings, Crest Builder, TRC Synergy and Naza TTDI Sdn Bhd, to develop tracts of land controlled by Prasarana.
Two large or significant developments are the project in Brickfields with Bina Puri, which is slated to have a gross development value or GDV of about RM1.3 billion, while in Dang Wangi LRT station, Prasarana is partnering Crest Builder in what is touted to be a RM1 billion development.
Prasarana has a 21.2% stake in the Dang Wangi project which will be settled by a combination of cash and office lots while in Brickfields, Prasarana is likely to have a 20% stake in the venture.
This move to own commercial property assets as opposed to just selling the land and reaping a one-off gain, was viewed suspiciously by certain quarters.
“Prasarana should stick to what it knows, operating the public transport systems….(else) it will lose focus, and what does Prasarana know about commercial rentals anyway?
“This sort of diversification can lead to costly mistakes for Prasarana,” a market watcher said.
Shahril defended the move and explained, “We need the recurring income…it’s as simple as that. Let me give you an example…The Dang Wangi land which is basically a station on some 2.7 acres of prime land, the structure can go up to 40 stories, as the plot ratio is very good…And this land is leased to us for 60 years. So we thought it best to develop this land and share in the spoils…why should we waste it?” he said.
While there are several plots of land, maybe 10 or 11 plots, there are a few which could generate interest such as a RM15 million piece in Taman Tun Dr Ismail, and larger tract in Melawati as well.
Will these property development initiatives help steer Prasarana out of the mire or add to the company’s woes?
Tomorrow: The question and answer session with Shahril.
You must be logged in to post a comment.