GUIDELINES FOR CASE STUDY

1. Objective of this case study:

The main objective of the case study is to evaluate the capital investment projects. Firms
make investment decisions only after considering the returns that a particular project would
generate and its profitability in the long run. As the projects involve a lot of expenditure, firms
evaluate and scrutinize them more rigorously. As the money that a firm has–whether in the
form of equity or debt–is limited, it should be careful while selecting or rejecting a project. If
a firm is not cautious while making capital expenditure decisions, not only the valuable time
of the firm but also a lot of money would be wasted in the process. The case study of
Iskandar Malaysia focuses on the capital investment decision project at Teluk Bahang
Johor.

2. Case Study Content o Cover page o Table

of Content
o Chapter 1 : Introduction (Summary of case study, Iskandar Malaysia Investment) o

Chapter 2 : Case Study Answer

2.1 Question 1
2.2 Question 2
2.3 Question 3
2.4 Question 4
2.5 Question 6
2.6 Question 7
o Chapter 3 : Conclusion and Recommendation ( Question 8)
o References o Appendix

3. Case Study Report

Cover Sheet Tittle, Name, ID No. and Class/Group
Font Arial
Font Size 11
References Between 1- 10 sources
References Format American Psychological Association (APA) Format
Pages Between 1 to 50 pages
4. Deadline
• The Case Study Report should be submitted before/ on 11 January 2024.
• Upload your Case Study Report at google classroom or any digital
platform
 CASE STUDY: DEVELOPMENT OF ISKANDAR MALAYSIA
By: Syamsyul Samsudin

Overview

Iskandar Regional Development Authority (IRDA)“IRDA Act 2007 (Act 664) empowers IRDA to
facilitate the promotion, planning, processing and infrastructure development.” Collaboration with
relevant authorities ensuring seamless service delivery to investors (example: one-stop centre to
fast-track approval and provide customer service) Supported by the Prime Minister and Chief
Minister of Johor, both Joint Chairmen of the IRDA Members of Authority and esteemed Advisory
Council Integrated planning to ensure world-class benchmarks are adopted in development, for
example in transportation, urban design, safety and security etc. The roles and responsibility or
IRDA are Economic Planning Clusters, recommend policies, laws, actions and incentives, brand
guardian of Iskandar Malaysia as an investment destination, promote private and public
investments in Iskandar Malaysia, disseminate information to investors and public, monitor and
align sector developments, coordinate and monitor enabler developments and principal
coordinating agent for approval.

History

The Iskandar Malaysia is established to come to be Southern Peninsular Malaysia’s most

developed area, where living, entertainment, environment and business seamlessly converge
within dynamic and lively cities. Located at the most southern pointer of Peninsular Malaysia,
Iskandar Malaysia (within the Johor state) is strategically placed on the globe’s busiest delivery
routes, and its abundant endowment of natural and personnel has both underpinned Johor’s past
excellences and emphasizes Johor’s future possibility. Johor’s relative abundance has actually
been secured by a celebrated evolution of undisturbed and mutually strengthening combination
of political security and continuity, a dynamic and deeply revered Sultanate, and social and
cultural cohesion amongst its multi-ethnic populace that has actually been a continuous resource
of strength, development and revival. Malaysia’s optimal national connection infrastructure
enables effortless access to the residential economic climate, opportunities and sources within
the nation. Being at the heart of the Asia area and at the crossroads of the East-West field routes
creates financially rewarding opportunities from expanding economies such as Indonesia, China
and India. Along with its closeness to a worldwide hub and the large economy of Singapore, and
having 2 road links and train links provides smooth ease of access to its market. Iskandar
Malaysia’s international scope is assisted by a global airport and 2 world-class harbors. Covering
a location of 2,217 square kilometres, around three times the size of Singapore, Iskandar Malaysia
provides substantial supply of land which is priced competitively. The area has all set
infrastructure such as electric energies, transport networks and services, and wide based
telecoms. The economy is well branched out with successful clusters arising around the
electronics, coordination’s, food and farming, tourism and oil and petrochemical industries.
Iskandar Malaysia is occupied with a multi-lingual (including English) and educated labor force,
offering skilful people varying from the solutions, technological to the professional sectors.
Investors and company operators venturing into Iskandar Malaysia are able to take conveniences
of the competitive price structures of doing company here. Being a project of Malaysian Federal
Government, together with the Johor State Government, Iskandar Malaysia’s vision to be a solid
and lasting metropolis of global status has the continuous dedication, support and sponsorship of
the Governments of this nation and condition. Fact about Iskandar Malaysia

• Land Area covers a land size of 2,217 sq.km, 3 times the size of Singapore and 48 times
size of Putrajaya.
• Iskandar Malaysia is estimated to have 1.3 million people or 43% of Johor’s population of
3.17 million.
• Total Iskandar Malaysia GDP is about USD 20 billion in 2005, 60% of Johor’s total GDP
of USD 33.4 billion. Current per capita GDP for Iskandar Malaysia is about USD 14,790
which is higher than the Johor per capita GDP of USD 10,757 but half of Singapore’s
(about USD 30,000).
• Services and Manufacturing sectors are the two main pillars of Iskandar Malaysia’s
economy, but Services dominate by contributing about USD 10 billion in Iskandar
Malaysia.
• Within the Services sector, Wholesale and Retail trade contributes 42.2%, Tourism and
Hospitality (16.8%), Professional and Business (14.6%), Transport and Related (12.7%),
Medical and Educational (6.7%), Financial (6.6%).

Investment
Iskandar Investment Berhad formerly known as South Johor Investment Corporation Berhad was
formed on 2 November 2006. Heads of Agreement was signed to form a new company to drive
the development of catalyst projects (previously referred to as "super develo per"), the Iskandar
Investment with an eventual shareholding structure of Khazanah Nasional (60%), EPF (20%) and
Kumpulan Prasarana Rakyat Johor Berhad (KPRJ) (20%), a company wholly owned by the Johor
State Government. The earning per share for every investment is RM 3 per share. The definitive
agreements were signed on 19 December 2006 and is expected to be completed in May 2007.
Iskandar Investment Berhad (IIB) will be set up with total assets of app roximately RM3.4bn of
land and cash at the outset. It will also own a significant land bank in South Johor through various
subsidiaries and Joint Venture companies which will be created in the future. Ecah investment of
IRDA, the organization set as 17 percent required rate of return. As a company wholly owned by
Federal and State government investment agencies, IIB will lead the implementation of various
strategic and catalyst Iskandar Malaysia initiatives including implementing of some of the major
Ninth Malaysia Plan projects within the Iskandar Malaysia through various Special Purpose
Vehicles and partnerships with the private sector. Datuk Syed Mohamed Syed Ibrahim is the
President and CEO of Iskandar Investment Berhad. IIB will also own a significant land bank in
South Johor through various subsidiaries and Joint Venture companies which will be created in
the future. Iskandar Investment will lead the implementation of various strategic and catalyst
Iskandar Malaysia initiatives including implementing of some of the major Ninth Malaysia Plan
projects within the Iskandar Malaysia through various Special Purpose Vehicles and partnerships
with the private sector. IIB does this by investing in selected strategic and catalytic initiatives
through shareholding stakes in joint ventures or contribution of land eit her through sale or lease.
Besides that, IRDA also plan to take over Hoowland Berhad with RM 330,000, 25,000 share
outstanding with the price and EPS of RM 12 and RM 3 respectively.

IIB are under IRDA supervision. Apart from managing the operations, monitoring, reporting and
treasury functions for IRDA’s operating grants, the IIB unit is also the custodian of the public sector
grants. The grants being managed include those for the development expenditure through the
Rancangan Malaysia Ke-9 and Rancangan Malaysia Ke-10 totalling a few hundred million, the
PEMANDU Corridors and Cities grant worth RM63.4 million, and the National Talent
Enhancement Programme of RM1.66 million. In addition, the Finance unit is also managing the
disbursement of funds entrusted to IRDA including those for the Social Project Fund and TERAJU
Fund. While ensuring the financial governance of the payment process, the Finance unit has also
been able to adhere to its target to ensure that a speedy payment process is achieved within 10
working days from receipt of complete documentation. Iskandar Malaysia was an economically
challenging year during which countries and regions such as Japan, North America and the
Eurozone experienced a steady recovery. Iskandar Malaysia, however, managed to buck the
trend by delivering committed investments of RM21.53 billion (or cumulatively RM106.31 billion)
compared to RM15 billion in 2012. Realised investments grew strongly by 15.76 per cent. For all
those investment at Iskandar Malaysia common stock currently selling for RM 34 per share and
preferred stock selling at RM 83 . In near future, IRDA plan to invest a new project at Teluk Bahang
Johor.
Financial Review
The financial was characterised by on-going uncertainties in the Euro Zone economies,
geopolitical developments in the Middle Eastern world and natural disasters in Japan and
Thailand. As an open economy, Malaysia was not insulated from these developments, thus it was
challenging for its economic growth during the year. Building on the momentum achieved in
previous years, IRDA was able to turn in a commendable financial performance and commitment
in delivering outstanding achievement during the ‘Tipping Point’ of Iskandar Malaysia.
Accordingly, Iskandar Malaysia has been a banner year for IRDA in which a number of catalytic
projects were completed such as LEGOLAND Malaysia, Puteri Harbour Family Theme Park and
Marlborough College. The key financial highlights are as follows:

1) For the financial year ended 31 December 2019, the Group registered revenue of RM1.55
million derived from its subsidiaries through the rental income in Prisma Harta Sdn Bhd
(PHSB) of RM1.36 million and Auxiliary Police services income in IMSEC Sdn Bhd (ISB) of
RM0.19 million.
2) IRDA may acquired Finewood Studio for RM 29,000 in form of either cash or stock.
3) IRDA and Finewood studio are 100% equity finance.
4) The number of share or IRDA is 40,000 unit with EPS RM 5 and MPS is RM 22.
5) IRDA’s continued and committed approaches in promoting Iskandar Malaysia at both local
and international markets through an increase in branding activities and get sources by issue
bond which is selling 7% discount at par with each bond matured in 15 years .
6) IRDA analyse the Teluk Bahang project with initial investment strategy RM 1.5 million, has
ten year life and no salvage value. The project cost will be depreciated on straight -line basis
to zero over the life of the project.
7) Significant growth in promotional activities through IRDA’s participation in various trade
missions, events, conferences, forums and symposiums while enhancing the public
awareness as well as promoting Iskandar Malaysia’s brand presence globally.
8) The professional consultation fees for 2013 have increased significantly to RM2.78 million
(2012: RM0.82 million) to cater for the strategic consultancy fees and blueprint
implementation requirements aside from the yearly maintenance of IRDA’s existing system.
Among the major expenditures during the year incurred were for the Human Resource
Consultancy Framework, Human Resource Rewards Review, IRDA Geographical Information
System (“GIS”) Masterplan and Simulation Study with respect to the Implementation of Sungai
Segget Project.
9) There were no major asset purchases during the year as IRDA had continued with its existing
prudence drive of curbing its investment on capital expenditure by limiting it to cater for
expenditure on replacements and improvements only. As a result, the sign ificant decrease of
 35% in fixed assets was mainly due to annual depreciation of RM1.54 million (2012: RM1.68
million).
10) The gain value of the merger is RM 21,000 more than cost of acquisition.
11) Teluk Bahang project will project amount of sales 1,000 per unit per year, which are sold 5,000
per unit. The variables cost per unit is RM 3,000 and fixed cost are RM 400,000 annually. 12)
The significant increase of the other receivables, deposits and pr epayments by 59% or to
RM2.89 million (2012: RM1.82 million) was primarily due to the expansion in the Special
Development Fund’s other receivables and deposits value. The selling price and variable cost
per unit are RM100 and RM50 respectively for the first two years. Iskandar Malaysia is making
forecast their expenses and revenue by price and variables cost. From year 3 onwards, the
price and variable cost will be RM75 and RM25 per unit respectively.
13) The Finewood Studio EPS is 2, MPS 10 and number shares is 25,000.
14) For mergers purpose Iskandar provided 50,000 share outstanding with price RM 30. 15)
Operational cash balance of RM35.24 million that were represented by accumulated profit
sharing income, committed professional consultancy fees, advertising and promotional costs
and other operational expenditures approved by the management as well as two months
operating expenditure reserve and follow by the market risk premium is 10 percent, T -Bills
are yielding 5 percent and tax rate is 35 percent for Iskandar Malaysia and all subsidiaries
16) Development expenditure cash balance amounted to RM455.42 million mainly reserved for
contractual obligations under the Tenth Malaysian Plan projects, Creative Industry Talent
Development Programmes and National Talent Enhancement Programme (“NTEP”). During
the year, Development grants of RM288.96 million, Creative funds of RM10.00 million and
NTEP funds of RM1.67 million were received and total of RM118.25 million was disbursed for
various projects and initial net working capital is RM 30,000.
17) Social Project Fund of RM48.32 million will be utilised in accordance to the social projects
approved by the Social Development Committee consistent with the strategies and initiatives
as stated in the Comprehensive Development Plan (CDP); and
18) IRDA projection 10 percent changes for all variables for Teluk Bahang project..

Conclusion
The achievement of the RM100 billion-investment milestone is a result of the collaboration
between Federal and State agencies and the various stakeholders. The company corporate tax
is 35 percent. Investment figures have been impressive but, in addition, d ue to the economic
activities generated in Iskandar Malaysia, there has been further demand for employees in Johor.
It is estimated that 390,000 new jobs have been created in the Manufacturing and Service sectors
from 2013 to 2019 In addition to that, various business opportunities are being created for the
local community. For example, currently, Johor is the third state, after Selangor and Kuala
Lumpur, with the largest number of Small and Medium Enterprises (SMEs) in Malaysia. A total of
10.7 per cent of the nation’s SMEs are located in Johor and 90 per cent of these are in the Services
sector. Realizing the potential of SME development in Iskandar Malaysia, IRDA is currently
developing an Iskandar Malaysia SME Strategic Framework to ensur e SME businesses are
accelerated and internationalized, so that their inclusion in the rapid development of Iskandar
Malaysia is greatly felt. The development of Iskandar Malaysia is important to Johor as it is a
manifestation of the Government’s plan to decentralize development and spread it out to all
corners of Malaysia, thereby helping to ensure that no Malaysian is left behind in reaping the
benefits from, and seizing the opportunities generated by our nation’s economic growth. Looking
at Iskandar Malaysia within the national context, it is an economic corridor with a role to play in
driving the nation towards a high-income nation. We are pleased that Johor has such a significant
and influential role in contributing towards the nation’s growth.

Questions
1. Discuss the capital investment process.
2. Discuss the scenario and sensitivity analysis.
3. Calculate the OCF Base, Best and Worst case.
4. Calculate the NPV for Base, Best and Worst case.
5. Evaluate the sensitivity of base case operating cash flow (OCF) to changes 10 percent in
variables cost.
6. Based the answer on sensitivity, discuss the impact towards IRDA.
7. Calculate base case financial breakeven level of output. What is the degree of operating
leverage (DOL) at this point and discuss the answer.
8. Advice the IRDA for Teluk Bahang projects either good investment or not based on calculation
and discussion above.