Buying ENCORP Bhd will Boost Felda Investment Future Earnings

Felda Investment Corp (FIC), a newly set up investment arm of Federal Land Development Authority (Felda) had shaken up the Malaysian construction industry by purchasing all the shares in Encorp Bhd held by two major shareholders for RM239.72mil last month. Rather than paying over the odds for large construction giants such as SP Setia, Faber and etc, FIC have showed excellent business skills by buying a substantial stake in the mid-cap construction and property group.

Since Felda has a huge land bank throughout the country, the best way to make a lot of money quickly is to monetize the land bank via development projects. This is a common strategy that has been used by many developers such as SP Setia, Sime Darby and Ecoworld to boost their earnings. However, since FELDA does not have the expertise, skills and capability to execute large development projects, buying ENCORP Bhd makes perfect sense. 

The reason i say it makes perfect sense is because Encorp has a reputable track record via its signature development projects in Malaysia and Australia which include its flagship Encorp Strand in Kota Damansara, Encorp Cahaya Alam in Shah Alam, The Enclave Hillside Villas in Batu Feringghi, Encorp Marina Puteri Harbour in Nusajaya and Residences on McCallum Lane in Perth.

As at June 2013, Encorp’s gross development value stands at RM3.5bil with its construction division’s order book generating over RM2.2bil and its concessions valued at RM2.2bil. With these kind of numbers, Felda is well positioned to become another major player in the construction and property development market and will be able to challenge the "big players" soon. 

Personally, i think ENCORP, due to the fact that it is owned by FELDA will perform better than the other major property development players in the coming years. This is because ENCORP will be buying land from its parent company i.e. FELDA, and if FELDA sells its land cheaply to ENCORP, ENCORP profit margin will be higher thus giving FIC a bigger slice of the profits in the future. Well this is just my opinion. To those of you who are familiar with the share market, you guys shall pay attention to ENCORP's price. Maybe it is a good time to invest into the company.