KUALA LUMPUR: Furniweb Industrial Products Bhd will be diversifying into the property development sector with its first project being two 38-storey condominium blocks with a gross development value (GDV) of RM560 million.
The project’s gross development cost is RM380 million, with the first phase of construction due to commence in the third quarter of this year.
The residential project will be developed by Premier De Muara Sdn Bhd, a 60:40 joint venture between Premier Gesture Sdn Bhd, a wholly-owned unit of Furniweb, and Almaharta Sdn Bhd.
According to a circular to shareholders, the project is expected to generate a gross development profit of about RM180 million over the proposed development period of four years.
Furniweb also said the diversification would provide the group with an additional income stream and would reduce the group’s reliance on its existing core business.
Speaking to reporters after its extraordinary general meeting yesterday, Furniweb group managing director Jimmy Cheah Eng Chuan (pic) said the group is optimistic about the venture, despite a potential softening in the property market.
“The whole point of diversifying is to bring the group to a whole new level. Two of our new executive directors (Datuk Lua Choon Hann and Datuk Wee Cheng Kwan) have experience in this field and they proposed the venture into property development,” he said.
Group chairman Datuk Michael Lim said he is confident of the project’s prospects, particularly its location in the heart of Kuala Lumpur which is within a 400-metre radius of the Jelatek light rail transit (LRT) station.
“There are a number of good factors here. We have well-experienced people on our board, we are a stable public-listed company and also urbanisation is a major global trend where more and more people are moving into cities,” he said.
Lim added that with the potential price per square foot of the residential units being under RM1,000, the development would be able to attract significant interest.
The development will be funded via internal funds and/or bank borrowings.
Furniweb is also proposing a renounceable rights issue of up to 54.45 million shares at 55 sen per share, on the basis of three rights shares for every five existing shares held.
The rights issue will be done together with the issuance of up to 54.45 million warrants on the basis of one warrant for every one rights share held.
Some RM29.95 million is expected to be raised in proceeds from the rights issue with warrants — part of which will be used to fund the expansion of the group’s factory in Vietnam.
Furniweb manufactures and markets furniture webbing, safety webbing, covered elastic yarn, rubber strips and narrow fabrics. The group caters mainly to the export market.
The stock closed at 81.5 sen, up 1.5 sen yesterday, bringing its market capitalisation to RM73.8 million.
This article first appeared in The Edge Financial Daily, on April 15, 2014.
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