PJD: No merger plan now, but does not discount it

KUALA LUMPUR: PJ Development Holdings Bhd does not have any plans to merge with OSK Property Bhd at this juncture. Both have a common substantial shareholder Tan Sri Ong Leong Huat, but this does not discount a consolidation  in the future.

“If restructuring can bring benefits to shareholders in the future, why not? We don’t discount that, but right now as it is, it is all rumours”, said PJD managing director Andrew Wong.

He told reporters after the company AGM yesterday that it will announce if there is a restructuring.

Speculation on the merging of the two companies came about when Ong surfaced with a deemed 21.31% equity interest in PJD last week. He also controls 71.65% of OSK Property.

PJD’s net profit for the first quarter ended Sept 30 more than quadrupled to RM30.4 million from RM6.7 million a year ago. The higher earnings were partly due to a gain on disposal of long-term quoted investments of RM9.4 million. Revenue was higher at RM236.13 million compared with RM163.6 million.

The best performing divisions in terms of profit before tax margins are properties (16.7%), hotel (15.3%), and building and material (14.3%).

Its construction division still recorded the lowest in margins at 3.6%, though this was an improvement from 0.72% in the 2013 financial year (FY13).

According to Wong, currently this division has an order book of RM1.12 billion, with a potential RM1 billion on the cards, which will last the company for two to three years.

On maintaining its performance in FY14, PJD’s management said it will depend on the demand of its properties.

PJD managing director Andrew Wong says the company has nine ongoing projects, with a gross development value of RM1.6 billion, and unbilled sales of over RM800 million

“In 2014, we see contractors tendering for projects will have priced in the increase in costs in anticipation of the GST [goods and services tax] in April 2015. For units that are not sold, we will have to increase the prices to maintain our margins,” said PJD executive director Ong Ju Xin .

On the real property gains tax revision, Wong views it as a “knee-jerk” reaction, a temporary setback which will not affect PJD much as its exposure to Johor is minimal.

Ong said the company is confident that demand for properties will continue to be strong once the knee-jerk reaction is over in 2014, and the government’s policies to ensure that the bubble does not burst is timely.

According to Wong, PJD presently has nine ongoing projects, with a gross development value (GDV) of RM1.6 billion and unbilled sales of over RM800 million. This will last the company until end-2014.

For the next three to five years, PJD estimates a GDV of RM4 billion for new projects.

In the pipeline is the development of a five-acre (2.02ha) site in Genting Highlands consisting of 923 serviced apartments and a 312-room hotel.

“We have submitted our plans to the relevant authorities and awaiting approval,” said Ong.

PJD is still on the lookout for landbank and will purchase the price is right.

This article first appeared in The Edge Financial Daily, on November 22, 2013.


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