KUALA LUMPUR: KEN Holdings Bhd is poised to embark on a huge development project in Johor Baru.

The proposed mixed development, with an estimated gross development value (GDV) of RM1.22 billion over six to seven years, is expected to deliver gross profit of RM301 million, about three times KEN’s current market capitalisation of RM114.1 million at its closing price of RM1.19 last Friday.

For the project, KEN acquired four parcels of land, collectively measuring about 999,433 sq ft or 9.28ha, through the proposed acquisition of a 100% stake in land owner Gadini Sdn Bhd from Malaysia Building Society Bhd (MBSB). The acquisition is now in the final stage.

“The land is strategically located in Johor Baru which has good potential,” said a KEN management executive, who added that the company will source for internal and external funding to develop the project without having to look for a joint venture partner.

Tan controls 50.11% of KEN Holdings.

Filings with Bursa show that KEN will pay RM56.17 million cash for Gadini, funded entirely through internally generated funds. The purchase price, which includes the settlement of Gadini’s liabilities, is sharply below the RM97 million MBSB paid to acquire Gadini in 1997.

KEN had RM73.1 million cash as at March 31 and has zero borrowings. It is therefore in a comfortable position to fund the acquisition. Chairman Tan Boon Kang controls 50.11% of the company.

A pioneer in green development, KEN said it will transform the JB land into a green township in the southern region.

In a statement, the company said the proposed development will be a mix of residential, commercial, serviced suites, corporate offices and retail podia that will be undertaken over six to seven years commencing in 2013.

According to the company, the gross development cost of RM914.58 million will be funded via a combination of internally generated funds, sales proceeds from the development and bank borrowings. However, the funding portion has yet to be determined at this juncture.

The proposed development represents a huge feat for KEN as it has thus far dealt with only niche projects, the largest being KEN Rimba — a township in Shah Alam measuring some 24ha.

It will also be KEN’s maiden foray into the southern region. At present, KEN’s projects are mostly situated within the Klang Valley, apart from a development in Batu Ferringhi, Penang, comprising 12 exclusive villas.

KEN’s financial standing has been improving in the last five years, apart from 2007 and 2008 when the global economic slowdown occurred. Revenue for the financial year ended Dec 31, 2011 (FY11) more than doubled to RM87 million from RM33 million a year ago. Net profit has also shown encouraging figures.

FY11 saw saw net profit growing some 22% to RM23.2 million or 25.53 sen a share from RM19 million a year ago.

KEN’s first quarter results for 2012 (1QFY12) however, failed to match its performance for the previous corresponding period due to the completion of its KEN Bangsar and Shah Alam projects. Net profit was down 38.7% to RM3.11 million.

Revenue fell by RM7.97 million to RM11.59 million in 1QFY12 compared with a year ago.

This article appeared in The Edge Financial Daily on July 30, 2012.

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