Titijaya Land Bhd has proposed to acquire a 100% stake in property company NPO Builders Sdn Bhd for RM115.61mil via the issuance of shares, which will give it access to two pieces of prime freehold land that has proposed developments to the tune of RM2.4bil and estimated gross profits of RM600mil.
Sources say that the proposed development comprises some 6,000 to 7,000 units of affordable homes. Furthermore, it is very likely that there is substantial off-taker who will come in to make a bulk purchase of some 20% of the units.
Currently, the development order for one of the lands has been secured as of May 18, 2016, while the other is in the process of being completed.
The proposed development of the lands will comprise of commercial shops, serviced apartments and affordable homes.
When contacted, Titijaya deputy managing director Lim Poh Yit says that he could only say that this acquisition was a good deal, and he was confident that affordable homes were the way to go.
“The trend now is affordable homes. The proposed price range of NPOB’s units are at between RM300,000 to RM450,000. Building affordable homes is what Titijaya does. We felt that the lands under NPOB were in very prime and matured location, and this was a very good opportunity for the group,” says Titijaya group managing director Lim Poh Yit.
In an announcement to Bursa, Titijaya says it had entered into three separate conditional share sale agreements with the vendors: Titi Kaya Sdn Bhd, Lee Eng Wah and Lim Wen Yeh, for the proposed acquisition of 2.04 million shares, representing the entire issued and paid-up share capital of NPO Builders Sdn Bhd for RM115.61mil to be satisfied via the issuance of 79.73 million consideration shares.
Interestingly, Brem Holdings Bhd is one of the substantial shareholders of NPOB, where it holds an indirect 51% stake of NPOB via Titi Kaya Sdn Bhd.
The directors of NPOB are Tan Sri Khoo Chai Kaa, Lim Kee Leay, Low Yew Hwa and Lee Eng Wah.
Khoo is the managing director of Brem Holdings.
Meanwhile, the consideration shares are priced at RM1.45, which represented a discount of 0.92% to the five-day volume-weighted average market price of Titijaya shares of RM1.46 up to the last practicable date. Titijaya closed Friday at RM1.60.
Following this, NPOB will become a wholly-owned subsidiary of Titijaya. Via their new consideration shares, the new vendors will own some 17% of Titijaya.
NPOB is the registered owner for two prime pieces of land in Mukim of Bukit Raja, District of Petaling, Selangor, an area now known as Damansara West - measuring 13.44 ha and 5.26 ha each. Both lands have received their respective development orders for the development of residential, mixed and commercial developments.
The lands are located along the left side of Jalan Batu Tiga or Sungai Buloh’s main road travelling from Pekan Subang Baru towards Bukit Jelutong and off the eastern side of GCE travelling from Denai Alam towards Bukit Jelutong.
In an independent valuation done by Cheston International (KL) Sdn Bhd, the two pieces of lands have a market value of RM142mil.
Following this exercise, the Lim family which currently owns some 58.38% of the company will be diluted to roughly 48.75%. Naturally, it is likely that the Lim family will be accumulating shares to bring up the shareholding back to at least to 51%.
Meanwhile, the development of these lands will commence construction in the second half of 2017, and is expected to be completed by the second half of 2027.
“The proposed development is expected to be funded through a combination of internally generated funds of Titijaya and its subsidiaries, fund raising exercises or bank borrowings.
The exact mix of the sources of funding for the Proposed Development has not been finalised at this juncture,” says Titijaya in the announcement.
Titijaya also says that the issuance of the consideration shares as settlement for the proposed acquisition will enable it to conserve its cash resources for the enlarged Group’s operations whilst minimising the potential impact on its gearing.
“Premised on the above and taking into consideration the strategic location of the Lands as well as the development prospects for residential and commercial purposes, the proposed acquisition is expected to enhance the future revenue stream of the Titijaya Group and contribute positively to the Group’s financial performance in the future when the benefits are realised,” it says.
Titijaya has a total landbank of 432 acres, valued at RM8.6bil. It presently has unbilled sales of some RM500mil.
For its financial year ended June 30, 2016, the company recorded a 16% drop in its net profit to RM68.34mil on the back of a 17.4% jump in its revenue to RM400.08mil.
In April, Titijaya roped in The Ascott Ltd to help develop two projects in Shah Alam in Selangor and Penang with an estimated combined gross development value (GDV) of RM4.1bil.
The partnership marks the first collaboration of Titijaya with an international company. It is also part of Titijaya’s plan to ride on Ascott’s extensive market network and operational capabilities.