This article first appeared in The Edge Financial Daily, on January 27, 2016.

KUALA LUMPUR: Selangor Dredging Bhd (SDB) is proposing to develop 588 units of residential properties with a gross development value of RM450 million on two pieces of land it is acquiring in Ulu Klang, Selangor.

In a filing with Bursa Malaysia yesterday, SDB said its wholly-owned subsidiary SDB Properties Sdn Bhd had signed an agreement with privately held Alam Palma Development Sdn Bhd to acquire the two pieces of freehold agricultural land totalling 4.097ha for RM67.5 million.

SDB said the land had development potential and is part of the group’s ongoing identification of suitable properties to add to its land bank.

It plans to fund the proposed acquisition by bank borrowings and units of properties developed by SDB Group.

It noted that the gearing ratio of SDB Group will be increased by 31.58% to 33.39% after the acquisition, which is expected to be completed by the end of the first quarter of next year.

“The acquisition is expected to increase net assets of RM6.57 million of SDB Group for the financial year ending March 31, 2016 (FY16), arising from the profit on 23 units of properties set off against [the] balance purchase price,” it added.

The development of the land, meanwhile, will be funded by internal funds and/or bank borrowings.

SDB said it is unable to disclose the original cost of investment, date of investment and net book value of the land, as it is not privy to such information.

It noted that, however, the purchase price was RM4.8 million lower than the market price of RM72.3 million, based on a valuation by Raine & Horne International Zaki + Partners Sdn Bhd.

SDB said the expected commencement and completion dates of the development will be decided later, but it expects its consolidated earnings and earnings per share will be increased by RM6.57 million and two sen respectively for FY16, arising from the profit from 23 units of properties set off against the balance purchase price.

SDB shares closed unchanged at 94 sen yesterday, with a market capitalisation of RM406 million.