Or even an IR? VEN SREENIVASAN reports on Gallant's big plans for Bintan

AN INTEGRATED resort (IR) with a casino in Bintan?

Not really a new idea, but it could finally come to fruition if Sesdaq-bound

Gallant Venture Ltd gets its act together.

Gallant, an investment holding company resulting from the restructuring of the Salim group's assets by the Indonesian Bank Restructuring Agency (IBRA), debuts on the local bourse tomorrow.

Its vendor shares, at 50 cents apiece (compared to an NAV of 49.32 cents), represent 11.6 per cent of its total share capital of 2.41 billion shares. Its main shareholders, post-IPO, will be Salim Group (24.65 per cent), Salim's 60 per cent-owned unit Parallax (26.02 per cent), SembCorp Industries' subsidiary SembPark Holdings (26.84 per cent), Singapore's Ascendas group (7.32 per cent), and UOB (2.51 per cent). The rest are minorities and the public.

The company - which now houses all 15 of the Salim group's different subsidiaries under four businesses - will redevelop Bintan into a second bustling Bali or exciting Phuket, says Eugene Park, Gallant's director and CEO.

'The primary aim of this listing in Singapore is to institutionalise our current shareholder base,' he said. 'This is not about raising money. It's about raising the profile of this company. In fact, all 280 million IPO shares have been snapped up, with institutional investors taking up the lion's share.'

Indeed, at a pricey 94 times price-earnings but with revenues of over $200 million and total assets worth some $1.5 billion, Gallant represents an asset-and-growth-concept play. Its four main businesses comprise its industrial parks in Batam, where it is the largest player; its utilities arm in both Batam and Bintan; resort operations in Bintan; and finally, its property development arm.

It already owns 63 hectares of industrial parks business on the two islands worth $442 million, while its utilities business, developed at a cost of some $409 million, provides telecoms, electricity, water supply and waste management services to the two islands. Both these businesses already generate strong cashflow with an EBITDA of $60-$80 million annually. In contrast, the resorts of the two islands have not done very well.

According to Mr Park, the real jewel in Gallant's crown is the development potential of its 14,400 hectares land bank at Lagoi Bay, just west of the existing Bintan resorts. The property, which is one-third the size of Singapore, is carried in Gallant's books at $3 per square metre (psm) or 28 cents per square foot (psf), which works out a a total of about $541 million.

'The property we own has a coastline of nearly 100 kilometres of pristine, white sandy beaches,' Mr Park said. 'We intend to initially develop about 10 per cent of this land at the Lagoi Bay area, which is framed by 5km of beaches. It is ideal for world-class resorts, high end-villas and niche developments.'

And a casino? Recent media reports in the country suggest that the government is considering plans for at least three casinos in the country, including one at Lagoi Bay in Bintan. The issue is currently being debated at the provincial level by politicians and community leaders. And with Singapore going ahead with its two casinos, some media reports hint that a bill could soon be presented to the Indonesian Parliament seeking to lift the existing ban on casino licences.

Critical mass

A casino would be an ace in the pack for Mr Park and his team, though he insists he is not placing all his bets on it. 'What we have in mind is a Phuket or Bali-type resort just a short ferry ride away from the region's busiest air hub, the biggest tourism gateway and two of the region's biggest integrated resorts' he said.

But first, Mr Park sees the need for a bustling resort town at Lagoi Bay. 'The problem with Bintan now is it lacks critical mass,' Mr Park said. 'Besides everything being priced at Singapore prices, the place has no night life. No buzz. No Patong beach town, or a Kuta.'

But not for long. 'We will establish a whole village, with shops, markets, bazaars,' he says. Gallant intends to do this by building the infrastructure for selected retailers and residents from the southern parts of the island to settle in Lagoi Bay and set up businesses.

If all goes according to plan, Mr Park calculates that the beachfront plots at Lagoi Bay could be sold for at least $100 psm to potential investors. Comparative prices for similar beachfront properties (under similar 30-plus-20-year lease terms) in Bali such as Kuta range from $200 to $300 psm.

Given that the cost of infrastructure development would be about $30 million, and adding the $3 psm cost of the land, the sale of the 1,500 hectares of land at Lagoi Bay could yield Gallant at least $40 psm, or a net profit of some $600 million - enabling it to recoup the entire carrying value of its massive Bintan island land bank.

But can it be done? 'When we did the road show for institutional investors, especially in the Middle East, most seemed more interested in the land than our IPO shares,' Mr Park. 'Obviously, these sophisticated investors see the potential of this prime real estate just next door to Singapore.'

No doubt, they might be calculating that Bintan's sandy white beaches - and possible casino - could cash in on some of the convention and casino crowd descending on Singapore's own IRs.

'The property we own in Bintan has a coastline of nearly 100km of pristine, white sandy beaches.'
- Eugene Park, CEO, Gallant Venture.