A closer look at Talam Corp Bhd

The Selangor government’s decision to approve an additional RM391 million budget allocation to Mentri Besar Inc (MBI) to take over the debts owed by Talam Corp Bhd to three state agencies has stirred controversy.

Basically, under the move, MBI will use the money (via Selangor Industrial Corporation as a channel?) to settle the amount that Talam owes subsidiaries of Selangor Development Corporation (PKNS), Kumpulan Darul Ehsan Bhd (KDEB), Permodalan Negeri Selangor Bhd (PNSB) and Yayasan Pendidikan Selangor. The state government (via SIC?) is then supposed to recover the amount due from Talam.

While critics are viewing it as a bailout or window-dressing, Mentri Besar Khalid Ibrahim says the rationale is to ensure that Talam gives a higher priority to its debt (to the state), incurred over the last decade, ahead of its other creditors. On 10 Nov, Khalid gave Talam three months to settle the debt, incurred in connection with several property development projects. That remains to be seen.

In any case, I hope the Selangor state government will also take action against those responsible in the three state agencies who allowed such a large debt to go uncollected for so long.  What sort of security did they obtain from Talam?

Whatever the reason for the takeover of the debts, let’s take a closer look at Talam.

The Edge reported the following on 10 Aug 2009:

Talam, a township developer, has been classified as an affected company under PN17 since Sept 1, 2006, after its auditors were unable to provide an opinion on its results for its FY2006 ended Jan 31. Talam also defaulted on several of its term loans and bond obligations.

As part of Talam’s regularisation plan, the company issued a number of securities to various creditors, including the now-defunct discount house Abrar Discounts Bhd. Abrar received preference shares, loan stocks and Islamic debt securities worth RM423.35 million as settlement from Talam as part of the latter’s regularisation plan.

Profit/(Loss) before tax(at group level):

• 2009 – RM60.6 million
• 2008 – RM5.8 million
• 2007 – (RM6.9 million)
• 2006 – (RM772.6 million)
• 2005 – RM130.8 million

Talam directors (click here)

Directors’ remuneration:

• 2009 – RM1.9 million (9 directors, three of whom received more than RM300,000 each)
• 2008 – RM1.8 million

Debt (non-current liabilities) to equity ratio: 0.5 (previous year – 0.6)

Liquidity ratio (Current ratio):

• Current assets: RM1.5 million
• Current liabilities: RM2.4 million
• Current assets:Current liabilities ratio = 0.6:1 (previous year – same)

This means that its current (liquid) assets are much less than its liabilities due within a year.

“Other payables” amount to RM404.3 million.

Extract from Talam Annual Report 2009:

Other payables and accrued expenses

The obligation arising from the acquisition of land is in respect of obligations arising from the Universiti Industri Selangor (“UNISEL”) project, whereby the Selangor State Government had alienated three parcels of land to the Group in consideration for the development of UNISEL.

In 2001, Maxisegar Sdn. Bhd. (“MSSB”), a wholly-owned subsidiary, entered into an agreement with the State Government of Selangor for the financing and construction of the main campus of UNISEL on 572.16 acres of land at Berjuntai Bestari, Selangor Darul Ehsan for a total value of RM750 million. In return, the State Government of Selangor had alienated three parcels of leasehold land to MSSB as follows:

Acres RM’000
Batang Berjuntai 3,000  345,000
Taman Puncak Jalil 801  337,500
Saujana Damansara 110  67,500
Total 3,911  750,000

MSSB was unable to meet its financial obligation to bear the development and maintenance costs due of approximately RM134.0 million (“obligation due”) of UNISEL and as such, in the previous financial year, the long term portion of MSSB’s obligation under the said agreement has been reclassified to current liabilities and it has entered into an agreement with Kumpulan Darul Ehsan Berhad (“KDEB”) and Pendidikan Industri YS Sdn. Bhd. (“PIYS”) (both of which acted as nominees of State Government of Selangor) whereby MSSB agreed to settle the obligation due by transferring 1,715.9 acres of Batang Berjuntai land which the parties have agreed shall be valued for the purpose of settlement at RM80,000 per acre to KDEB and/or PIYS. The settlement agreement is pending fulfillment of certain conditions
precedent.

Substantial shareholders (based on Annual Report 2009):

(Based on Register of Substantial Shareholders as at 10 June 2009)
No. of Ordinary Shares of RM0.20 each
Direct Deemed
Name of substantial shareholders Interest %*4 Interest %*4
1. Tan Sri Dato’ (Dr) Ir Chan Ah Chye 130,769,592 6.78 854,561,543 *1 44.32
@ Chan Chong Yoon (“TSDCAC”)
2. Puan Sri Datin Thong Nyok Choo 7,493,945 0.39 977,837,190 *2 50.71
(“PSDTNC”)
3. Kumpulan Europlus Berhad 791,465,067 41.05 – –
(“KEURO”)
4. IJM Corporation Berhad (“IJM”) – – 791,465,067 *3 41.05
NOTES:
*1 Deemed interested through his spouse, PSDTNC, his daughter, Chan Siu Wei and by virtue of his interest in
Pengurusan Projek Bersistem Sdn Bhd, Prosperous Inn Sdn Bhd, Sze Choon Holdings Sdn Bhd and KEURO
pursuant to Section 6A of the Companies Act, 1965 (“Act”).
*2 Deemed interest through her spouse, TSDCAC, her daughter, Chan Siu Wei and by virtue of her interest in Pengurusan
Projek Bersistem Sdn Bhd, Prosperous Inn Sdn Bhd, Sze Choon Holdings Sdn Bhd and KEURO pursuant to Section
6A of the Act.
*3 Deemed interested by virtue of IJM holding 25% in KEURO.
*4 % shareholding based on voting share capital as at 10 June 2009 of 1,928,102,532.

On 17 July 2009, the Edge reported that Kumpulan Euro had disposed of a 9.10 per cent stake in Talam, a move which was described then as “puzzling”.