Answers needed on Widad@Langkasuka

THE RM40bil Widad@Langkasuka mixed-use development in Langkawi, Kedah, was an ambitious project, touted as an iconic product and a distinctive attraction.

But the mega-billion-ringgit project has hit a snag following the withdrawal of Dubai-based investment outfit Bin Zayed International Group of Companies (BZI).

BZI, which was roped in by Widad Business Group Sdn Bhd (WBG), confirmed recently that it had pulled out from the joint venture (JV) as it no longer saw value in the project since 2022.

BZI managing director Datuk Seri Dr Shamir Kumar Nandy says it wants to “focus on more promising opportunities with realistic turnaround times and greater potential.”

In fact, the investment outfit has committed to investing US$2bil (RM8.9bil) in Malaysia over the next five years.

BZI says as part of its strategic expansion plan, it will tap into real estate, renewable energy and financial services to attract investments into the country.

That said, it is strange for BZI to no longer see value in the project soon after it crystallised the partnership with WBG in March 2022 via a JV agreement. Both parties had signed a collaboration agreement in March 2021.

Under the agreement, WBG would have 70% equity interest in the joint company, while BZI would own the rest.

How has the project become unrealistic so soon after the JV?

What was the straw that broke the camel’s back?

Surely, when both parties entered the partnership, extensive groundwork would have been done to determine the project value, realistic return on investment and payback period.

Naturally, when the withdrawal announcement was made, many demanded answers, especially Kedah Mentri Besar Datuk Seri Muhammad Sanusi Md Nor, who had hailed the project as having met all requirements of the Kedah Development Plan 2035.

Some blamed the state government’s failure in planning and managing mega projects involving large investments and not providing the necessary infrastructure and policies to attract and retain investors.

The Widad@Langkasuka development is intended to be a tourism destination built on the paradigm of “Malay vernacular architecture” — based on the archipelago’s history of designs that integrate green and eco-friendly native tropical features.Widad@Langkasuka will establish a smart city using sustainable technology that preserves the island’s geographical nature and rich cultural heritage, to complement the integrated development’s homes, businesses, educational facilities and medical hub.

With much at stake, WBG should provide some clarity on the fate of the project.

WBG is the single largest shareholder of construction player Widad Group Bhd with a 13.7% stake currently.

Tan Sri Ikmal Opat Abdullah is WBG’s founder and group executive chairman.

Recall that the project was supposed to have progressed following a groundbreaking ceremony in October 2022.

WBG, via its wholly owned subsidiary Langkasuka Land Sdn Bhd (LLSB), was to kick off construction on Langkasuka Village, phase 1 of the project, then.

LLSB picked WBG’s wholly owned subsidiary, Widad Builders Sdn Bhd, as the contractor for the RM40mil earthworks package for the phase 1 construction.

The earthworks package’s groundbreaking ceremony was officiated by Sanusi and was targeted to be completed by Aug 3, 2023.

Phase 1 of the project comprises an international standard and tournament-ready golf course by the sea and lush villa resort homes.

It will also build a shopping utopia to be called Designers’ Brand Mall serving up international brand names, a shopping bazaar to be known as The Langkasuka Village, and a five-star seafront hotel and luxurious condominiums.

According to Sanusi, Widad is still carrying out the construction of phase 1 of the project on its own, albeit slowly, without BZI.

But the project is a huge undertaking. With BZI out of the equation, will the multi-billion- ringgit development go up in smoke?

To date, there is no official statement from WBG.

As it is, WBG is not exactly on a strong financial footing.

Based on the latest available filings with the Companies Commission of Malaysia, WBG recorded a net loss of RM113.12mil on the back of RM210.82mil revenue in the financial year ended Dec 31, 2022.

As such, it appears that for the project to progress, WBG will need to secure a new partner or funding as it may not have the financial strength to undertake the project alone.

Even its listed arm, WGB, is in a dire financial situation. It has been making losses in the last two financial years.

In the third quarter ended Sept 30, 2024, WGB saw its net loss reduced to RM2.14mil from RM7.65mil a year ago, while revenue fell to RM28.65mil from RM56.62mil.

This was mainly attributable to increased activities in all business segments, strict control of overhead expenses, and lower finance costs.

However, on a nine-month basis, the company’s net loss widened to RM9.37mil from RM6.67mil a year ago, while revenue decreased to RM77.65mil from RM150.26mil.

On a brighter note, WGB’s operating cash flow has turned positive, with some RM14.87mil as of Sept 30, 2024, compared to a deficit of RM90.71mil as of Dec 31, 2023.

If the phase 1 work is ongoing, how much money has been poured into the project so far, and is there a penalty clause for pulling out from the project?

Will the project be injected into the listed company, as it may be easier to raise capital?

Whatever the decision, the listed company should not be seen as bailing out a project that will not provide reasonable returns.