By Stephanie Jacob
DAP’s Tony Pua has today questioned the investment rationale of 1Malaysia Development Bhd (1MDB)’s cash purchase of 310 acres of land from Tadmax Power Sdn Bhd, a wholly owned subsidiary of Tadmax Resources Bhd by Ivory Merge Sdn Bhd, a wholly-owned subsidiary of 1MDB Real Estate Sdn Bhd which in turn is a wholly-owned subsidiary of the controversial sovereign wealth fund
Tony Pua
Pua who is also the Member of Parliament for Petaling Jaya Utara questioned if 1MDB was “aware of the fact that the same piece of land, purchased at RM23.50 per square feet (psf) was last valued at only RM9.93 psf in August 2011?” and that “the valuation was conducted by Tadmax itself as was reported in the company’s 2012 Annual Report (page 113) – RM163.9 million for the 379 acres.
“While a new valuation was indeed carried out prior to the above sale in January this year, the question must be asked as to how the value of the vacant land increased by a massive 136.7% in less than 2.5 years!” Pua asked.
Furthermore as the sovereign fund is heavily in debt to the tune of more than RM30 billion and currently pursuing mega-property development projects in Tun Razak Exchange and Bandar Malaysia for which 1MDB is raising additional debt, 1MDB should explain why this additional investment was so crucial, said Pua.
The MP also highlighted the controversial background of the various companies involved with the sale and called into question the timing of the sale and its importance to Tadmax.
Citing a report from The Edge Financial Daily, Pua highlighted the financial standing of Tadmax based on comments by the company’s chief executive officer Faizal bin Abdullah, where the latter admitted that the “sale will ease the debt burden for the company which has only RM124,000 in cash reserves against borrowings of RM220.5 million as at September 2013.”
“Tadmax is bleeding financially with a net loss of RM8.52 million on revenue of only RM3.55 million over the same period,” said Pua.
Tadmax Bhd is formerly known as Wijaya Baru Global Bhd, while Tadmax Power Sdn Bhd was formerly known as Wijaya Baru Development Sdn Bhd prior to November 2013.
According to Pua, “the group was infamous for their complicity in the RM12.5 billion Port Klang Free Zone (PKFZ) scandal which has caused massive losses for the Malaysian Government. Kuala Dimensi Sdn Bhd (KDSB) which was appointed the turnkey developer by Port Klang Authority (PKA) for PKFZ is a subsidiary of Wijaya Baru Global Bhd (now Tadmax). KDSB also sold the controversial 753 acres piece of land in Pulau Indah to PKA at the astronomical price of RM1.09 billion in 2004.
“At the same time, Wijaya Baru Global and its other subsidiaries were appointed as main and subcontractors to the project. KDSB and Tadmax are both embroiled in legal disputes with PKA, while certain officers of both companies are being prosecuted for fraud by the Attorney-General over the PKFZ fiasco.”
During that period Tadmax’s single largest shareholder then was Tiong King Sing, who was also the chief executive officer of KDSB, since then he has sold his 30.15% equity in Tadmax in 2011 and now holds a 5.53% interest in the company.
Other directors of Tadmax include its chairman, Abdul Azim Zabidi the former treasurer for UMNO and its chief executive officer Faizal Abdullah who is the deputy chairman of UMNO Kapar Division.
Pua also highlighted that in early December 2013, Tadmax’s Faizal bought an additional 6.735 million shares at an average of 34.5 sen per share, taking his stake to 17.8 million shares or 4.78%. The day after the announcement, Tadmax closed at 60.5 sen.
The MP said that the sale created serious governance concerns over the sovereign fund’s “real estate adventures where it is given federal government land at massive discounts, while it funds richly valued private land acquisitions with debt.”
He added that given the history of Tadmax, its legal tussles with government bodies, and in addition to the state of its financial affairs and the sudden increase in the valuation of the transacted land, 1MDB must immediately assure Malaysian taxpayers that this is not a bailout for Tadmax and its shareholders.
Over the past week, Pua has released several statements regarding the activities of 1MDB questioning the reasonability of several of their ventures such as their investment in the Caymen Islands and their failure to submit their financials to the Companies Commission of Malaysia and sudden parting with auditors KPMG.
Kinibiz has also raised questions as to investments and financial moves of the sovereign fund over two in depth series, which can be read here and here.
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