This article first appeared in The Edge Financial Daily on January 3, 2018
KUALA LUMPUR: MB World Group Bhd will develop an integrated waterfront in Telok Permata, Johor, with an estimated gross development value (GDV) of RM1.46 billion.
This follows the signing of a development right agreement (DRA) between MB World’s wholly-owned subsidiary Danga Palm Sdn Bhd and PIJ Property Development Sdn Bhd (PPDSB), a wholly-owned unit of PIJ Holdings Sdn Bhd, on Dec 31, 2017.
MB World said the DRA grants it the development rights to 49.62 acres (20.08ha) of land bank in Telok Permata, with an estimated GDV of RM1.46 billion, as opposed to an outright purchase of land bank requiring a significant cash outlay.
“PPDSB had applied for and obtained the relevant approval for the conversion and usage of the development land for building purposes. This will allow the group to commence with the development project in a short period,” it said in a filing with Bursa Malaysia yesterday.
“This is consistent and in line with the group’s strategic direction to focus on property development activities to sustain its growth through acquisitions, joint ventures, or other arrangements with land owners,” it added.
The 49.62-acre land includes 15 acres belonging to the government. The development land is located off an internal service road of Kampung Teluk Jawa, some 15km northeast of the Johor Baru city centre.
MB World said it will develop the land in several staggered phases as a mixed development with commercial and residential components. They include serviced apartments, affordable houses, townhouses, shop offices and a mall.
It added that the development’s first phase will feature Taman Perbadanan Islam Telok Permata, an affordable housing project under the Rumah Mampu Milik Johor initiative on the 15-acre government land.
Under the DRA, PPDSB will be entitled to receive from MB World an amount equivalent to 7% of the project’s GDV, or not less than RM100 million.
MB World is also responsible to pay the cost of the land premium to the relevant authorities for the government land amounting to RM6.54 million on behalf of PPDSB.
The 49.62-acre development land, with a leasehold tenure of 99 years, has obtained a planning permission for mixed development with a development plot ratio of 1:6:0. The development has been approved by the Johor Baru City Council.
MB World will complete the project within 10 years from the date of the DRA. “The DRA is not expected to have a material effect on MB World’s earnings and earnings per share for the financial year ended Dec 31, 2017.
“However, the DRA is expected to contribute positively to MB World Group’s future earnings. Any profit attributable to MB World Group would be realised in stages over the project’s tenure based on its progress,” it said.
MB World’s quarterly earnings have risen year-on-year throughout 2017, with a net profit for the third quarter ended Sept 30, 2017 growing 42.4% to RM6.59 million from RM4.63 million the year before.
This was largely due to a 91.3% jump in its revenue to a record RM60.61 million due to improved contributions from its property development division. MB World shares closed unchanged at RM2 yesterday, with a market capitalisation of RM314.75 million.