2016 Sepang International Circuit renovation - 18

After a comprehensive renovation of the track itself, Sepang International Circuit is now turning its focus on the periphery – according to The Sun, the company is investing RM1.13 billion on a master plan that will see the circuit become an “integrated, multifaceted entertainment hub” over the next five to seven years.

The English-language daily quoted SIC CEO Datuk Ahmad Razlan Ahmad Razali as saying that the master plan will make use of the 156 ha of undeveloped land owned by SIC in Sepang. In total, the company owns 270 ha in the district, with 114 ha already taken up by the circuit, its facilities and the surrounding 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 the publication.

Raglan added that because some components of the plan require high capital and more planning, the company would work on the “quick wins” firsts – projects that are able to be partly funded with internal cash, and which will enhance or complement existing facilities.

The company is currently enhancing facilities with new paddock hospitality for Formula 1 and MotoGP teams, a new south paddock facility, renovation of the go-kart circuit and a new advanced driving facility. “We are currently conducting a feasibility study to look at hotels in Sepang,” Razlan said. “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.”

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As far as funding is concerned, Razlan said that 80% of these projects will be financed through external means such as bank loans, while the rest will be completed using internal funds. As of the end of 2015, SIC had RM60 million in its coffers, enough to fund its projects for the next one or two years.

“Right now SIC does not have any bank borrowings so this is the first time we are embarking on bank borrowings,” he said. “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.”

Razlan added that the company working with various bankers to find the best way to implement the plan, and has already completed most of the feasibility studies, except for the 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,” he said. “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.”

Additionally, Razlan said that the master plan – which has already garnered the curiosity of a number of keen investors – is aimed at making the circuit a daily destination and multifaceted hub that will attract more than the usual throng of F1 and MotoGP goers. “We need to go beyond that perception,” he said. “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.”

2016 Kawasaki ZX-10R International Media Launch - 3

The company expects to reduce dependence on motorsports upon the completion of the master plan, with 60% of its revenue anticipated to come from non-motorsports activities, and only 40% coming from F1 and MotoGP. The latter is currently contributing 50% to 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.

The company aims to grow its revenue this year by 5% over the RM90 million accrued last year. It remains confident in achieving this target despite a three-month track shutdown over resurfacing works, due to positive ticket sales for the upcoming Malaysian Formula 1 and MotoGP grands prix as well as non-motorsport events that will be held at the circuit.