Legoland Malaysia is coming up in the Iskandar Development Region in Johor. Some 30 million Lego bricks will reportedly be used in the RM750 million theme park, which will boast more than 30 rides, shows and attractions, from roller coasters and boat rides to adventure walks.
Developer Iskandar Investment Berhad (IIB), says the entrance fee will be “affordable for a family of six”. It is so is convinced that Malaysia's first theme park will do well that it has revised projected visitors numbers upwards — from 1 million a year to 1.4 million. Malaysians are expected to make up half of these, with foreigners — mostly Indonesians and Singaporeans — making up the other half.
There is also some good news for adults: The theme park is reportedly expected to create some 5,000 jobs. Production director Tim Burnell of Merlin Entertainments, which will manage the park, was in Johor in July to recruit for some of the jobs. The company was looking to hire model makers, who can earn anywhere between RM1,400 and RM5,000 each.
Sounds well and good. But the financials don’t quite add up:
1. MYR 750 million project cost. Say it is funded 50-50 with equity and debt, ie RM375m each.
2. If they reach the targeted 1.4m visitors a year, and assuming RM100 per person, that is RM114m revenue per year.
3. Interest and salary costs alone will be RM119m! This is based on: Interest RM19m (assuming 5% interest on RM375m borrowings); salaries RM120m (5,000 employees * RM2000 per month * 12 months).
4. That leaves nothing to pay back the borrowings, and we have not even incorporated depreciation, maintenance, utilities ….and what about profits for the shareholders who have put up RM375m?
5. Note that RM100 per person = RM600 for a family of 6. Which is probably too high too be “affordable”. So revenues will be even lower than RM114m.