Salcon to venture into property development

KUALA LUMPUR: Water player Salcon Bhd will venture into property development after it acquires two parcels of land measuring a total of 51,476 sq m in Johor Baru for RM99.7 million, or about RM180 psf.

The acquisition will be made by Salcon’s 50.01% owned subsidiary Nusantara Megajuta Sdn Bhd from Total Merit Sdn Bhd, which has accepted the former’s offer for the land at the stated price.

According to Salcon’s announcement to Bursa Malaysia yesterday, Total Merit had entered into a development agreement (DA) with the Johor government and State Secretary Johor Inc (SSI), which is the registered owner of the said land, whereby it agrees to build and deliver the “consideration premises” to the state government in return for the rights to develop the land.

Salcon said Total Merit had represented that it would procure SSI’s consent to transfer the land in favour of Nusantara to facilitate the proposed acquisition.

Jabatan Kerja Raya is currently in possession of the said land and under the DA, the vacant possession of land can only be delivered by SSI once Total Merit has delivered the consideration premises.

Salcon undertakes water solutions projects such as the Triang water supply scheme in Jelebu, Negri Sembilan.

In its announcement, Salcon did not elaborate what the consideration premises were. “The letter of offer is subject to the execution of a definitive sale and purchase agreement to be entered into between the purchaser (Nusantara), SSI and Total Merit which will set out the full terms and conditions of the proposed acquisition on or before Dec 7, 2012, being 30 days from the date of acceptance of the letter of offer,” it said.

According to Salcon, the proposed acquisition of the land is part of the group’s plan to diversify its revenue sources and reduce its dependence on its existing core business of designing, constructing, operating and maintaining water, sewerage and wastewater facilities and water concession business.

“The group believes the diversification into property development, which has growth prospects, will be beneficial to the group’s future prospects,” it added.

This article first appeared in The Edge Financial Daily, on Nov 9, 2012.