Global Oriental shares soar after RM488mil shopping mall sale plan

  • Business
  • Friday, 25 Sep 2015

PETALING JAYA: A surge in the volume of shares traded followed the announcement by Global Oriental Bhd (GOB) that it plans to sell a shopping mall in Subang Jaya to Pavilion Real Estate Investment Trust (REIT) for RM488mil cash.

The counter emerged as one of the most actively traded stocks on Wednesday with 57.39 million shares changing hands, climbing 12% or six sen to 57 sen.

“Some investors might have bought into the stock in anticipation of a potential special dividend,” said a remisier, adding that the mall’s sale price was higher than GOB’s current market capitalisation of RM259.2mil.

The sale is expected to be completed by early next year.

The company, however, has dismissed the possibility of returning some money back to shareholders. It said the sale proceeds would be used to pay bank borrowings and for working capital.

As at June 30, the company sat on a cash pile of RM65.83mil, while total borrowings stood at RM270.83mil.

The last time the company announced a dividend was in 2005 when it was still known as Equine Capital Bhd. 

The mall, known as da:mén USJ, sits next to another mall, The Summit, adjacent to Lebuhraya Shah Alam and Persiaran Kewajipan, one of the main roads in Subang Jaya. To the south of the mall lies Lebuhraya Damansara-Puchong.

A valuer said the deal seemed fair to both parties, as it is hard to get a good mall in a matured neighbourhood like Subang Jaya.

“It is sizeable and the property will be managed by an established team. It is also not easy for a REIT to buy the right malls because of the lack of supply,” said the person.

Pavilion REIT will be buying the five-storey shopping mall with a lower ground floor of approximately 420,920 square feet of net lettable area (NLA) and two levels of basement car park with 1,672 parking bays.

The property sits on a 3.5-ha freehold parcel. The mall, to be opened in November, is part of an integrated commercial development, and includes 41 shops/offices as well as 480 units of apartments. Pavilion REIT said the purchase was consistent with its investment objective and would be accretive to its distributable income.

The REIT manager added that the acquisition would be funded by debt, which would increase the gearing ratio to 23% from 15% as at June 30. This would still be below the gearing limit of 50% prescribed by the REIT guidelines.

“Besides providing geographical diversification to Pavilion REIT’s portfolio of investment properties, upon completion, the proposed acquisition will enlarge Pavilion REIT’s portfolio from RM4.4bil as at June 30 to RM4.9bil.”

As part of the deal, both parties agreed that the average gross rent per square foot per month under tenancy agreements should not be less than RM9.20, inclusive of the service charge as at the completion date.

If the average gross rent rate falls below that level, the purchase price of the mall should be reduced by RM6mil for every 10-sen drop and would be pro-rated where applicable for any reduction of less than 10 sen.

In a separate deal in January, CapitaMalls Malaysia Trust had announced the acquisition of Tropicana City Mall and Office Tower at Jalan SS20/27, Petaling Jaya, for RM540mil.

Opened in 2008, Tropicana City Mall has an NLA of 448,248 sq ft.

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