(From left) Mah Sing Group Bhd founder and group managing director Tan Sri Leong Hoy Kum, group chief executive officer and executive director Datuk Voon Tin Yow, KLK Land managing director Lee Wen Ling and Kuala Lumpur Kepong Bhd executive chairman Tan Sri Lee Oi Hian announcing a strategic joint venture to acquire and develop 419.15-acres of prime freehold industrial land in Kulai, Johor.
PETALING JAYA: Analysts are mostly positive about Kuala Lumpur Kepong Bhd
’s (KLK) strategic joint venture (JV) with Mah Sing Group Bhd to develop an industrial park in Kulai, Johor.
This comes after KLK’s wholly-owned subsidiary, KLK Land Sdn Bhd, disposed of 419.15 acres of freehold plantation land in Kulai for RM273.9mil to be developed into MS Industrial Park@Kulai with an estimated gross development value (GDV) of RM2.26bil.
The project will be undertaken via a 60:40 JV, with Mah Sing retaining management control while KLK holds 40% equity interest, thus enabling KLK to monetise its Johor land while retaining exposure to longer-term industrial development upside under the Johor-Singapore Special Economic Zone.
BIMB Research said in a report the price of RM273.9mil, agreed on a willing-buyer willing-seller basis, implied value of RM15 per sq ft for the land or around 12% of GDV, which is within the range of prevailing benchmarks for large industrial developments in Johor.
“In our view, this represents a fair and disciplined monetisation of plantation land with industrial conversion potential, while preserving upside through KLK’s continued 40% stake in the JV,” the research house noted.
In addition, the land disposal is expected to provide cash for KLK, offering some balance sheet support.
At the same time, any potential capital commitments arising from KLK’s participation in the JV remain subject to the final development and funding structure.
“Based on KLK’s latest cash balance of RM2.5bil and net gearing of about 0.65 times, we believe the transaction is unlikely to materially strain the group’s balance sheet,” BIMB Research said.
The research house has maintained a “hold” call on KLK with a target price of RM21.10 per share.
“Overall, we view the transaction as a prudent exercise in recycling plantation land, allowing KLK to unlock value from its land while retaining optional exposure to longer-term upside from industrial development, without materially increasing execution or balance-sheet risk,” it added.
Meanwhile, MBSB Research said it expects the partnership between KLK and Mah Sing to be mutually beneficial and strategically positioned to enhance KLK’s industrial business.
The collaboration capitalises on KLK’s sizeable land holdings, while leveraging Mah Sing’s proven development capabilities and strong brand equity in Johor.
Based on rough estimates using a land price assumption of RM15 per sq ft, MBSB Research said KLK could recognise a net disposal gain of at least RM131.5mil after accounting for 10% in estimated disposal-related costs, 10% in real property gains tax, and an RM87.6mil capital injection into the new JV company.
“This equates to a net gain of 12.2 sen per KLK share. The proceeds may enhance shareholder value, either through a potential special dividend payout or via reinvestment into new brownfield estates,” said MBSB Research.
The research house kept its “neutral” call on KLK with an unchanged TP of RM20.23 per share.
