KUALA LUMPUR (June 27): Poultry farmer LTKM Bhd proposed to diversify its principal and its subsidiaries' activities to include property development, which is expected to contribute more than 25% to the group’s net profit.

LTKM told Bursa Malaysia in a filing that the diversification into property development business would enhance its ability to unlock the value of an 8.5-hectare land in Kuala Langat, Selangor; and expand its revenue and income stream.

It said the development with a gross development value (GDV) RM130 million and cost of RM90 million, would feature 169 landed property units within a guarded neighbourhood, as part of the `Rumah SelangorKu’ project.

The expansion into property development business through this project would provide a good track record for the group.

“The board anticipates the property development business to contribute more than 25% of the net profit and/or result in a diversion of 25% or more of the group’s net assets, based on the GDC of the project,” LTKM said.

Currently, the group is principally involved in poultry farming and is one of the leading egg producers in the country, with a fully integrated poultry farming operation involving feed processing, production of eggs, processing and trading of organic fertilisers.

Based on the last audited financial statements as at March 31, 2015, the group recorded a revenue and net profit after tax of RM192 million and RM46 million, respectively.

Previously, LTKM carried out a small-scale property development project in Banting that was completed in 2013, but it did not contribute significantly to the revenue and profit as the operations were small, relative to the group’s core business.

“However, the board views [that] property development activities would become more significant, with the plan to develop the 8.5-ha land acquired in 2010 in Jenjarom, Selangor.

“It has a net book value of RM22.9 million, based on the last audited consolidated financial statements as at March 31, 2015. The land is registered to its subsidiary, Jarom Firstville Sdn Bhd,” it said.

Despite not having extensive experience in property development, LTKM said it would leverage on managing director Datuk Tan Kok and chief operating officer Ng Seng Keong’s expertise on land matters and development.

It said Tan completed a RM42 million GDV residential development in Taman Sentosa, Klang, Selangor, between 2005 and 2008; and a 26-unit double-storey residential project in Banting, Selangor, through a joint-venture in 2005.

LTKM said the funding for the latest project would be determined at a later stage, after taking into consideration its gearing level, interest costs and internal cash requirements for its business operations.

Barring unforeseen circumstances, and subject to conditions of the property market, it expects the proposed diversification and project to contribute positively to its future growth, with an alternative source of income, apart from its existing core business.

The proposed diversification will take immediate effect, after shareholders’ approval is obtained in an upcoming extraordinary general meeting.

LTKM closed unchanged at RM1.41 today, for a market capitalisation of RM183.4 million.