Wednesday, August 12, 2009

Legoland Iskandar – another bailout on the way?

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.


Keang said...

Hey u r famous now. got your blog mentioned on this morning's BFM show.

Anonymous said...

"5000 jobs" - probably does not mean direct employment under the park - it probably include ancillary, support and other "spill-over" employment. This type of number is normally exaggerated to reflect the importance/contribution of the project.

BUT, I do agree with you that the project is not financially feasible on a "back of the envelope" calculation. As usual, $$$ is made in the initial phase (EPC), after that who cares about the LT sustainability - that's usual attitude in M'sia.

Lee Wee Tak said...

Cash and revenue inflow will be critical.

Projection of 500,000 to 700,000 Malaysians will visit a year...that's a bit on the high side because it is not really easy to get there, given its location in Johor. Paying the toll from Northern Malaysia to get there could be expensive.

To maintain such a high level of annual visitors from Malaysia, we must have a huge population and able to go on annual vacations.

If the main foreign customers are from Singapore and Indonesia, well Singapore does not have that many population and they have so much other destination choices.

Perhaps we may get many customers from Singapore in the first couple of years but later, interest might be in decline.

As for Indonesians, yes, there are a lot of very rich Indonesians but even much more poor ones....I am not quite sure if they can make up the required numbers.

To draw the projected numbers, then Iskandar must really turn out to be a successful commercial centre with significant and thriving international presence.

Can they do it? I continue to hear rumblings of Malay rights being sold off to Singaporeans blah blah blah and that won't help.

To sustain a huge international and local clientele base for the Lego thingy, it must be surrounded by a thriving international business and cultural community and Iskandar chaps can learn well from how Singapore turn itself into a good and fun place to work in.

And Hassan Ali can take his alcohol ban show down to Iskandar are as well.

As you rightly pointed out the projected revenue may not be able to sustain loan repayment and maintenance in theme park is a critical success factor.The numbers do not add up and given the track record and norm that is, how much of the construction and development cost is at arm's length?

Anonymous said...

Mr Teh,

Another seat of the pants criticism? What about constructive works, eh?

Did your former clients outperform stock market based on your recommendation during your illustrious career as analyst?

Look below, to share what a are seen and the potential


Posted from Tony's blog

PM is paid S$5million a year. that is CEO level pay. Deservedly for a republic that is the 9th largest economy.

A mere politician pays RM10million. Unwarranted or fictatious claims for phantom construction works (source The Star). that is public funds, each Malaysian pays on average 30sen. Now this is only a small fish. what about the collective politicians namely those who can afford to stay in a RM3million mansion?

Mr Tony, What is the opposition government role. 30% Watchdog-governance and 70%economic development.

Share with us, what has Selangor govt achieved? for its people?

- depressed share prices for MNCs located in s'gor
- congestions on road
- poor FDIs
- poor encouragement of entrepreneurship
- poor Public University ratings, rankings.

offer Permanent Residents to S'poreans who invest >RM1mil in funds for >3years, in factories, in export based businesses

offer licenses to spearhead commodiities - worms farming, sheep rearing, fish culture

offer special purpose vehicles to invest in S'gor

offer research grants and JV between MNC and local tech universities

offer merit scholarships to S'poreans, Australian, East eurporean

Mr Tony, your potential is boundless. DOn't just sit there and yell the govt is no good. Out-peform them = that is competition at work.



Purple Haze said...

I am not really sure what Anonymous (Salam)'s point was in his posting. Could you or he/she clarify ?

There are a couple of revenue items that were not mentioned in your assessment

(a) food and beverage
(b) advertising rights

I am not sure how much these will generate but these may buffer the risk a little. This is, of course, assuming that one cannot bring their own nasi bungkus/ta pau into the theme park.

Simple Formula said...

Salam is a troll. He or she is probably stirring more shit elsewhere. Performance and compensation may be based on how many posts made.

From Wikipedia:
In Internet slang, a troll is someone who posts controversial, inflammatory, irrelevant or off-topic messages in an online community, such as an online discussion forum, chat room or blog, with the primary intent of provoking other users into an emotional or disciplinary response or of otherwise disrupting normal on-topic discussion

barons voleur said...

dont you think that the main visitor target is, rather than Malaysians, Singapore and Asian travelers commuting thru Spore on an attractive Singapore Airlines stopover package?

Anonymous said...


Hi my fellow M'sians,

On missing the point and calling me a throll is fine by me. Its a free country except that if you insult the govt u risked ISA-ed.
Really, the point of electing a politician is about the steering to economic heights, employment and purchasing powers. You notice the PR as an opposition stayed as an opposiiton. PR has 4 states under their management powers , but we have yet to see any real progress ie economically speaking.

Visit Bank Negara website and be shocked to see
high unemployment
record low FDI

also note, We spent on our kids education for 13 years only to lose them in universities in S'pore. then these top talents stayed on for better employment. By golly, we are subsidising and suipporting S'pore economy! just as India's grads working in USA Silicon valley.

Mr Teh CC himself worked overseas. WHy can't we make our top talents work here?!

Yes blame the BN government. But remember PR is the government of 2 richest states in country! so where is the PR results? Are they not claiming to be better?

Salam - (the troll? Midget? )

Chi-Chang said...

Salam is getting his points all mixed up and some facts wrong:

1) I never worked overseas. I've been loyally working here and paying all my taxes
2) He does not seem aware of the strangle-hold federal government holds on policies. Attracting investment involves financial and policy issues and key matters such as tax and other incentives, immigration (eg work permits for top personnel) are all controlled by Federal. So the main reason for the terrible numbers is still the BN govt.

Anonymous said...

Dear Chi-Chang,

Thank you for your clarifications.

1. You worked in Citibank (Malaysia) but given overseas roadshow assignments.

2. On BN has strangle hold on policies. But S'gor administration is still under PR. You don't need parlimentary approval for giving 20L free water. so work within PR powers of administration in the 4 states.

3. Your current role as mere 'watchdogs' instead of blood hound. Well, is doesn't work anymore, at least in Accounting field where auditors used to say that. NOw they are accountable and even given unprecendented prison sentence for negligence. Accountability today is about delivering results.

PR is still in the watchdog role? its not enough. MCA PResident is stregthening his hold on grassroots support by

-exposing and taking actions against allege corrupt ex-leaders.

-initiated investments in infrastructures

-initiated collaboration wiht overseas private univ with local Uni Colleges.

He didn't do that through parliment but in his personal capacity.

Over to DAP. What is their contribution? You mentioned I was wrong. I accept it as i don't know much about your personal life. Right it for us! what are the roles and concrete results we are seeing FROM DAP?


Anonymous said...


I guess, to you, having a 3-4 day trip overseas on official business is defined as 'working overseas'. ROTFLMAO!!!

So what if I insult the Govt? IMHO, the current Govt is run by scums of the Earth, all waiting like hungry hyenas for the easiest piece of meat so that they can line their bottomless stomachs aka pockets. Please direct the police or the Home Ministry to my comments here so that they can put me under the ISA act la.

By the way, can you please enlighten us all here as to whom or what an elected BN politician has done to steer the country to economic heights, employment and purchasing powers'? To my knowledge, they are doing a stupendous job doing so for themselves and their cronies!! Definitely not for the ordinary Joes on the street. They are merely getting the scraps.

Yes, PR has been in power since Mar 2008 in the states which they have won. This has been more than 18 months now. But has this thought ever crossed your mind? That there is so much shit left behind by the previous BN Governments that it now takes 2 generations to clean out these Augean stables?

Have you ever thought deeper as to why there is a brain drain in Malaysia? Blame it on the world of NEP (read Malaysia), where the lame and weak are constantly on life support, whilst the strong and the deserving is recognized and rewarded by other countries. This is not a PR issue. It is the Govt's and they need to be able to retain talent better. Meritocracy is the key. Social engineering only works in the short term, after which nature must be allowed to take its course.

Oh, by the way, I hope that you have the intellect to comprehend what is being reiterated here.

Anonymous said...

Dear Anonymous,

Thank you for the lengthy explaination that PR has too little time, therefore nothing much is show. Well, 18 months is still a long time. PR strategy is populist approach. BUt if you and I are hungry, that will not be impressive.