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KUALA LUMPUR: Inch Kenneth Kajang Rubber plc, which has rubber processing, tourism and palm oil production as its mainstay, plans to venture into property development next year.
Shareholders who attended the company's EGM on Monday, Mar 28 approved the disposal of a 181.7ha freehold tract in Bangi to UEM Land Holdings Bhd for RM259.9 million. Following the disposal, Inch Kenneth will still own 61.96ha in Bangi, which it plans to utilise for property development projects.
"We want to build something that will complement what UEM Land will do. They have proposed to develop the purchased land into a township. If this is the case, we will probably do a mixed development, with both residential and commercial aspects," Inch Kenneth group COO Hussain Ahmad Abdul Kadir told journalists after the EGM.
The company also plans to develop its landbank in Kajang, although this is still at the preliminary planning stage. Hussain didn't elaborate on the potential gross development value of the planned property projects.
Inch Kenneth first announced the proposed disposal of land to UEM Land last December. According to its circular to shareholders, palm oil revenue derived from the disposed land had fallen 13% to RM1.73 million last year, from RM1.98 million the previous year, as oil palm production at the Bangi estate had declined 35% to 2,718 tonnes from 4,210 tonnes in 2009.
"The decrease in oil palm production was due to the palm trees being too old and too tall to harvest, as well as the adverse weather conditions affecting the fruits," the company said in the circular.
Inch Kenneth plans to maintain its focus on palm oil by purchasing new land to replace its current plantation estates in Kajang and Bangi despite venturing into property development. The bulk of the RM259.9 million proceeds from the disposal of the Bangi land will be utilised for this purpose.
"After the disposal, we will have about 550 acres left (in Kajang and Bangi) for palm oil, so we are going to look for new plantations," said Hussain, adding that the company aims to buy 8,000ha to 10,000ha of greenfield (unplanted) land and 5,000ha to 8,000ha of brownfield (planted) land within the next two years.
According to the company's circular to shareholders, the company had received offers of land in Kelantan, Pahang, Johor, Sabah, Sarawak, Kalimantan and Sumatera. But Hussain said the company was only considering land in Malaysia.
Hussain estimates a capital expenditure of RM120 million to RM150 million for the brownfield land and RM50 million to RM80 million for the greenfield land.
"We will see returns from the brownfield land immediately, but the greenfield land will take at least three years," he added.
While the bulk of the proceeds has been allocated for the purchase of new plantation land, Inch Kenneth has also set aside RM30 million to build a rubber processing plant in Southern Thailand, which Hussain said would offer an abundant supply of latex and labour.
Additionally, the company plans to invest RM10 million from the proceeds to refurbish two of its resorts, Perhentian Island Resort and Motel Desa in Kuala Terengganu.
"Because of the good location of Motel Desa, we are looking at a couple proposals by architects to bring it to another level. It is currently just a budget hotel. We want to bring it up to at least a four-star hotel," said Hussain.
For FY10 ended Dec 31, Inch Kenneth's rubber processing division contributed 67% or RM18.9 million to revenue, while its tourism division contributed 22.9% or RM6.44 million, and palm oil production contributed 9.8% or RM2.78 million.
Revenue for FY10 grew 60.2% to RM28.2 million from RM17.6 million in 2009, although net profit dropped 82.8% to RM169,000 from RM982,000 on the back of lower returns from its associate company, Concrete Engineering Products Bhd (Cepco).
Cepco's revenue halved to RM98.82 million from RM197.57 million in 2009, which was attributed to a general slowdown in the construction industry during the year.
Hussain expects the disposal of the Bangi land to be finalised within the next three months. Inch Kenneth's share price gained 1.5 sen to close at 76.5 sen yesterday, with 369,500 units done.
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