GEORGE TOWN (Nov 18): Hunza Properties Bhd's shareholders have approved the group's proposed selective capital reduction (SCR) and repayment exercise.
The exercise will see Hunza being taken private by its majority shareholder Khor Teng Tong Holdings Sdn Bhd (KTTH) along with persons acting in concert, which hold an accumulated 59% stake in the company.
In an extraordinary general meeting (EGM) held today, 95.47% of Hunza shareholders approved the offer price for the SCR exercise, which was revised to RM2.90 per share in August, from RM2.50 previously.
Following the approval of the SCR, the entitled shareholders will receive a total capital repayment amounting to RM267.64 million, which represents a cash amount of RM2.90 for existing Hunza shares held on the entitlement date.
Hunza group founder and adviser Datuk Seri Khor Teng Tong said that the SCR price revision was done to better reflect the valuation of the company.
"I am happy with the outcome of the EGM today, I believe RM2.90 is a fair offer price that reflects the valuation of our company better, our team of corporate advisers will now be working towards the delisting exercise, which is expected to be completed by the first quarter of 2016," he told The Edge Financial Daily after the group's EGM today.
It is worth noting that Hunza shares have never traded at or above the SCR price of RM2.90 since the past five years. The SCR price is also a 2.5% premium to Hunza's current share price of RM2.83, but is a 17.4% discount to its net assets of RM3.51 per share as at Sept 30, 2015.
Khor is the director and controlling shareholder of KTTH. KTTH has a 32.30% stake in Hunza, and parties acting in concert hold 26.69%, thus bringing the total to 59%, making Khor the ultimate shareholder of Hunza since he owns 99.99% of KTTH.
Hunza's other substantial shareholders are Lembaga Tabung Haji, which owns 8.52%, and Yayasan Bumiputra Pulau Pinang Bhd (6.45%).
On what prompted the privatisation move, Khor said that tough domestic market conditions and increased competitiveness, especially in the Penang property sector, were the main drivers.
"Having said that, it will still be business as usual for us as a private company, and we will not neglect the element of corporate governance; we will still practise good corporate governance as a private entity," said Khor.
The group will now be setting its focus in the next three years towards its property development projects in Penang, such as Alila II, a high rise green building project comprising two blocks of 33/34-storey towers with 270 residential units located in Tanjung Bungah, and Phase 2 and 3 of Casa Innova double-story terraced houses in Bandar Putra Bertam. Altogether these projects have a gross development value of RM717 million.
Hunza will also be building 690 units of low-cost flats in Teluk Kumbar, which are expected to be completed by the first quarter of 2016, and has recently acquired a 3.924-ha freehold land in Bayan Baru for RM57.02 million, on which it intends to build affordable homes.
For its first financial quarter ended Sept 30, 2015 (1QFY16), Hunza reported a 41.8% decrease in net profit to RM4.44 million from RM7.63 million a year ago, mainly due to the absence of new property launches in the current quarter as well as higher operating expenses such as legal fees and loan drawdown expenses.
Revenue for 1QFY16 had also slipped 40% to RM31.8 million, from RM53 million in 1QFY15.
Hunza shares closed up one sen, or 0.35%, at RM2.83 today, with a market capitalisation of RM636.99 million.
(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)