SIC to spend RM1.13b to transform Sepang circuit

PETALING JAYA: Sepang International Circuit Sdn Bhd (SIC) is investing RM1.13 billion on a master plan that will transform the circuit into an integrated, multi-faceted entertainment hub over the next five to seven years.
CEO Datuk Ahmad Razlan Ahmad Razali said the master plan will be carried out on 156ha of undeveloped land that SIC has in Sepang. The land is part of SIC's 270ha in Sepang, of which 114ha has been taken up by the circuit, facilities and buildings.
"The estimated cost of our development which includes integrated entertainment hub, hotels, engineering, advanced driving facilities and all that is about RM1.13 billion, with an estimated gross development value of RM2.6 billion and estimated job creation is about 1,000," he told SunBiz in an interview.
Razlan said some components of the masterplan require high capital and more planning thus SIC's strategy is to work on the "quick wins" first, which are projects that can be partly funded with internal cash and will enhance or complement its existing facilities.
At the moment, SIC is enhancing its facilities with a new paddock hospitality for F1 and MotoGP teams, building a new south paddock facility, renovating its go kart circuit and constructing an advanced driving facility.
"We are currently conducting a feasibility study to look at hotels in Sepang. That should be completed by this month (July) and we hope to kick start our hotel project in the first quarter of 2017. These are what we call the quick wins, something that we can internally fund partly and with financing," said Razlan.
In terms of funding the master plan, he said 80% of the projects will be financed with bank borrowings and the rest with internal funds. As at the end of 2015, SIC had RM60 million cash in hand, which is sufficient to fund its projects for the next one to two years.
"Right now SIC does not have any bank borrowings so this is the first time we are embarking on bank borrowings. The bigger components like theme parks and potentially, hotels, will come to a different mode of financing which requires a lot more than just bank borrowings. We are looking to attract investors, operators, joint venture partners and so on. Before this, everything was internally funded," he added.
Razlan said it has been working with various bankers to seek the best way to implement the masterplan and has completed most of the feasibility studies, save for the ones on hotels.
"Once all these are completed we will strategise how we can put everything together with the help of the bankers we have spoken to. Then we will come up with a proper information memo and from then on, hopefully by third or fourth quarter we will start seeking out interest," he said, adding that a number of keen investors have already approached SIC.
Razlan said the master plan aims to position the circuit as a daily destination and multi-faceted hub that people visit for more than just F1 and MotoGP events.
"We need to go beyond that perception. Because we are so central for north and south markets, we want people to come to the circuit on a daily basis. It is a totally new position for us," he said.
Upon completion of the master plan, SIC expects to reduce dependence on motor sports with 40% revenue to come from F1 and MotoGP, and 60% from non motor sport revenue. At present, F1 and MotoGP contribute 50-55% to SIC's total revenue.
"We came out of the back of an accumulated loss of RM15 million in 2009 to accumulated retained earnings of around RM56 million for 2015. We have done relatively well. We also came out of the back of a RM9 million loss in 2009. Last year was not good for us due to the foreign exchange but in terms of accumulated profits we are doing quite well. It is still profitable.
"So the time now is to look at SIC's long-term sustainability, not to be dependent so much on F1 and MotoGP, to increase the non-motor sport revenue or motor sport/automobile revenue not related to F1 and MotoGP because we cannot assume that the government will fund this event forever. So we have to start thinking about life after F1 and MotoGP," said Razlan.
This year, SIC aims to grow its revenue by 5% from the RM90 million achieved last year. Despite a three-month track closure due to resurfacing works, it remains confident of achieving its target due to the positive ticket sales for the upcoming F1 and MotoGP events as well as non- motor sport events that are being scheduled at the circuit.