KUALA LUMPUR: Developer Titijaya Land Bhd is looking to acquire a piece of land of 8.26ha in the south-eastern part of Penang island from its major shareholder for some RM126 million cash, said sources, adding that the group has appointed corporate finance advisers to look into the exercise.
The price for the leasehold land translates into some RM141.72 per square foot (psf) with the site — near the second link and with a seafront — being earmarked for a mixed development worth RM2 billion in terms of gross development value (GDV).
That the acquisition could be a related party transaction (RPT) may raise eyebrows, given that it would be the group’s first major land purchase since its debut on Bursa Malaysia’s Main Market in November last year.
Meanwhile, the purchase consideration of RM126 million is higher than the entire cash proceeds raised by Titijaya from its initial public offering (IPO).
Group managing director Tan Sri Lim Soon Peng of the Lim family owns a 61.4% stake in Titijaya, which has a market capitalisation of RM693.6 million based on its closing price yesterday of RM2.04.
In Titijaya’s IPO last year, the family raised RM74.25 million from the offer for sale of shares while the group raised RM122.56 million from the public issue and private placement of new shares, all at RM1.50 each.
Of the proceeds, Titijaya intended to utilise about RM30 million to acquire new landbank, RM49.5 million for working capital, RM15 million for repayment of borrowings, RM24.3 million to repay advances from previous shareholders of its subsidiary Epoch Property Sdn Bhd and RM3.8 million to defray listing expenses.
As of Dec 31, 2013, the group’s cash and cash equivalents stood at RM115.4 million and it has not utilised the RM30 million from the IPO proceeds that it has set aside for land acquisition, according to a statement dated Feb 28 to Bursa Malaysia.
Meanwhile, its total borrowings stood at RM127.91 million, against shareholders fund of RM353.63 million.
“The family acquired the Penang land two years ago for RM126 million, from the ministry of agriculture & agro-based industry. To be fair, they won’t be making any profit by selling the land at the same price to the listed company. In fact, the market value for the land could have gone up, given that the second bridge is now opened,” said a source.
It is learnt that the family had wanted to inject the land into Titijaya pursuant to its IPO exercise last year. But this didn’t materialise due to unknown reasons.
According to analysts, the group has about 221 acres of land with a potential GDV of more than RM4 billion in its portfolio.
In a bid to enlarge its presence, last month it entered into a joint venture agreement with Bina Puri Holdings Bhd to develop a plot of land in Brickfields, Kuala Lumpur. The plan is to build mixed residential and commercial strata development, but there is no mention of its potential GDV.
For the six months ended Dec 31, 2013, Titijaya reported a net profit of RM32.8 million on a turnover of RM138.5 million. Gross profit came in at RM59.07 million, indicating a stellar margin of 42.6%.
Analysts said the group has planned to roll out about RM1 billion worth of projects this year. These include H2O — a serviced apartment project in Ara Damansara (GDV RM572 million), Embun Kemensah — a residential development in Melawati (RM215 million), and Mutiara Point Business Park and Zone Innovation Park industrial projects in Klang.
This article first appeared in The Edge Financial Daily, on May 6, 2014.
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