KUALA LUMPUR (Jan 6): LBI Capital Bhd's wholly-owned unit LBR Industries Sdn Bhd entered into four sale and purchase agreements (SPAs) to dispose of four parcels of adjoining vacant freehold development lands in Batu Ferringhi, Penang, to Crimson Legend (M) Sdn Bhd for RM50 million.

In a filing with Bursa Malaysia today, the property developer said the sale will unlock the value of the lands and will render it a net gain of about RM29.8 million.

It said initial development concept for the 1.8ha land, bought for RM17 million in 2010, was not feasible based on the current property situation and is not expected to generate attractive returns.

It added that there were uncertainties in the sales of the properties to be developed, particularly in the resort or tourism area. This is against the backdrop of challenging property market and the difficulty in obtaining end financing by purchasers.

The uncertainties in securing financing for the development of resort or commercial properties by the company was another reason cited by LBI Capital for the proposed disposal.

"Hence, the proposed disposal of (the) lands will provide an opportunity for LBI Capital to unlock the value of the lands, which are not currently used in the property development business of LBI and its subsidiaries, and realise a net gain of approximately RM29.79 million.

"The proposed disposal is also expected to improve the cash position of the LBI Group and strengthen its balance sheets in order to enable the LBI Group to embark on landbanking activities for other areas of property development purposes in which the Board is confident that may be able to generate better returns," it said.

The land is valued at RM48 million as appraised by property valuer PA International Property Consultant (Penang) Sdn Bhd through its valuation report dated Dec 31, 2015.

The proceeds from the sale would be used for future land acquisition activities, working capital, repayment of bank borrowings and redemption charge, real property gains tax and estimated expenses for the proposed land disposal.

Barring any unforeseen circumstances and subject to conditions in the SPAs, the board expects the proposed deal to be completed by the second quarter of 2016.

The proposed deal is expected to improve the earnings and earnings per share of the group for the financial year ending Dec 31, 2016.

LBI Capital shares closed one sen or 0.73% lower at RM1.36 for a market capitalisation of RM98.1 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.)