KUALA LUMPUR: WCT Bhd is buying a plot of commercial land with an abandoned shopping mall in Johor Baru for RM180 million cash, in a deal that potentially gives it recurring income. The deal nets the seller, Malaysia Building Society Bhd (MBSB), a one-time profit of about RM55 million.
WCT, which won a public tender, intends to undertake a mixed development project on the land situated “in a mature area of Johor Baru”, the company said in a statement yesterday.
The price WCT is paying MBSB’s wholly owned Idaman Usahamas Sdn Bhd, is 1.45 times the property’s net book value of RM124.55 million as at end-December 2011 and 1.13 times the RM160 million value ascribed by valuer Messrs Jordan Lee & Jaafar on Feb 15 this year.
WCT’s winning bid was more than double the only other bid of RM89 million received for the property, according to MBSB’s statement to Bursa Malaysia. MBSB said the disposal is in line with its objective to sell non-income generating assets and other previously acquired foreclosed properties.
Based on end-December 2011 numbers, the RM55 million estimated gain on disposal is expected to boost MBSB’s earnings per share by 5.5 sen and net assets per share by 5 sen to 98 sen. Its gearing ratio is also expected to fall to 0.084 times from 0.089 times, proforma numbers showed.
For its part, WCT expects the acquisition, which is not subject to shareholder approval, to boost future earnings and improve shareholders’ value “over the medium to long term”.
The acquisition also fits WCT’s desire to increase recurring rental income, which the company is attempting to grow with projects like the newly opened Paradigm Mall in Petaling Jaya and the upcoming klia2 Integrated Complex.
The freehold land, measuring 5ha with a four-storey vacant retail podium and a two-level car park, is situated in Jalan Skudai, the main road linking the North-South Expressway to Johor Baru city centre, WCT said.
The Employees Provident Fund, which owns substantial stakes in both WCT and MBSB, is deemed interested in the deal. WCT will partially fund the acquisition with borrowings, but said the debt is not expected to have a material impact on group gearing. The actual effect on gearing, however, will depend on the amount of borrowings, which have yet to be determined, WCT said.
WCT shed two sen to RM2.66 yesterday while MBSB was unchanged at RM2.40 apiece.
This article is appeared in The Edge Financial Daily on 24 August, 2012.
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