KUALA LUMPUR (Dec 30): System integration outfit Metronic Global Bhd (MGB) has announced it will be diversifying into property development, and has proposed to acquire land measuring 31,943 square metres in Kuala Krai, Kelantan, for RM9.8 million.
To help fund the development cost of the land, it has also proposed a private placement of up to 20% of its issued and paid-up share capital.
In a filing with Bursa Malaysia today, MGB said its wholly-owned subsidiary, M One Country Development Sdn Bhd (M One), has proposed to acquire the freehold land – 179 parcels of sub-divided plots, approved for mixed housing development – in Mukim Telekong, District of Kuala Krai, Kelantan, from the vendors Chai Fook Yoon and Tan Bee Leng.
The purchase price of RM9.8 million is to be satisfied via the issuance of new MGB shares equivalent to RM6 million, cash payment of RM1.88 million, and delivery of three completed units of three-storey intermediate shop houses with a value of RM1.82 million.
MGB, which intends to undertake a mixed development on the land, said the development plans are targeted to be submitted for approval after the execution of the sales and purchase agreement.
The project, deemed ‘Bandar Baru @ Kuala Krai’, comprises 137 units of residential lots and 42 units of shop lots, with an estimated gross development value of RM55.74 million.
Gross development cost is estimated at RM33.93 million, resulting in an estimated gross profit of RM21.81 million.
The project, which is estimated to commence in the second quarter of 2015 and complete within 48 months, is located at Telekong, which is 15km away from Kuala Krai, and is not affected by the recent flood, said MGB.
Earlier in November 2013, M One has also entered into a property development joint venture with Northern Paradise Sdn Bhd (NPSB), for the proposed development of a mixed residential and commercial project on various parcels of leasehold land, measuring approximately 0.5591 acres in Kuala Lumpur. The development period is five years from the date NPSB delivers vacant possession of the land to M One.
With these two proposed developments, MGB expects profits from the property development to contribute more than 25% of total net profits of the group, in the coming financial years.
As such, MGB has proposed to seek the approval from shareholders for the proposed diversification into property development, at an extraordinary general meeting.
MGB has also proposed to place out new shares of up to 20% of its issued and paid-up share capital, or 139.68 million new shares, to third party investors to be identified.
Presently, it has an issued and paid-up share capital of RM69.84 million, comprising of 698.4 million shares of 10 sen par value each.
“For illustrative purposes, based on an indicative issue price of 10 sen per placement share (the par value of MGB shares), the company is expected to raise gross proceeds of up to RM13.97 million from the proposed private placement,” said MGB.
Of the amount to be raised, half or RM6.9 million has been earmarked for working capital, comprising staff salaries and payment of development cost for the land, RM5 million for the repayment of bank borrowings, while RM1.88 million for cash payment to vendors.
MGB said the proposed acquisition and diversification is not expected to have any immediate material impact on its consolidated earnings for the financial year ending Dec 31, 2015, given the expected commencement date and development period of the land.
But, the proposed development of the land is expected to contribute positively to the future earnings of MGB, upon the recognition of sales revenue and earnings, as and when the development progresses, it noted.
“The proposed acquisition and proposed diversification are inter-conditional. The proposed private placement is conditional on the proposed acquisition and proposed diversification,” the group remarked.
MGB closed 0.5 sen lower at 8.5 sen today, with a market capitalisation of RM59.36 million.