Chiau family looks to tighten grip on Chin Hin Group Property

This article first appeared in The Edge Malaysia Weekly, on February 3, 2020 - February 09, 2020.

Chiau says he sees a lot of potential in CHGP and wants to demonstrate his commitment to the company to the investing public

Photo by Sam Fong/The Edge

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LOW-profile businessman and investor Datuk Seri Chiau Beng Teik finished primary school and then, at 13 years old, went to work at his father’s hardware store in Kedah. That was in 1975. Today, the 58-year-old building materials trader heads a mini business empire and has major equity interest in four locally listed companies — Chin Hin Group Bhd, Chin Hin Group Property Bhd (CHGP), Solarvest Holdings Bhd and Green Ocean Corp Bhd.

On Jan 13, the spotlight was on CHGP — formerly Boon Koon Group Bhd — after Chiau and his family launched a mandatory general offer (MGO) for the rest of the shares they do not own in the property firm at 30 sen apiece. The offer was not entirely a surprise, given that Chiau and his family had been actively accumulating shares of the company, as The Edge had reported in May 2018.

Chiau is the non-independent and non-executive chairman of CHGP. His family had a cumulative 31.39% stake in the company before raising it to 37.59% in mid-January, triggering the MGO.

In an interview with The Edge, Chiau says he sees a lot of potential in CHGP and wants to demonstrate his commitment to the company to the investing public.

So, what is his plan for CHGP?

“Within the next 12 months or so, CHGP will be acquiring land bank by itself. In the past, we have been using our private vehicle to acquire land before injecting property projects into CHGP. But in the coming year, we plan to use the listed vehicle to directly undertake two land acquisitions,” he says.

CHGP has identified two plots in Kuala Lumpur and Selangor, measuring about three acres each.

Chiau says CHGP is targeting to complete the acquisitions this year, as the company aims to launch two new serviced apartment projects in 2021 and 2022, with units selling at RM300,000 to RM400,000 each.

“In today’s market, one plot will probably cost us about RM50 million, which means we might have to fork out about RM100 million in total. But funding should not be a problem as the banks are ready to lend us about 70% and the remaining 30% will come from profit generated by our existing projects,” he says.

CHGP is in talks with the landowners, who appear keen to sell. However, the parties are still negotiating and finalising the details.


Focus on CHGP

Chiau reiterates that all future projects and land acquisitions will be undertaken by CHGP. “We will no longer use our private vehicle to acquire land bank or launch new projects. Instead, as far as the property business is concerned, we will be putting all our efforts into growing CHGP. Therefore, it makes good sense for us as a major shareholder to now increase our stake in the company.”

Chiau was a stranger to Malaysia’s corporate scene and investing fraternity until Chin Hin, a home-grown building materials specialist that he founded, made its debut on Bursa Malaysia in 2016.

He has not looked back since.His flagship company, Chin Hin, has been buying into non-listed companies, including Atlantic Blue Sdn Bhd, a solar firm that was eventually listed under the name of Solarvest Holdings.

On a personal level, Chiau emerged as a substantial shareholder of Green Ocean in 2017, before he was appointed group non-executive chairman a year later.

Perhaps more significantly, Chiau and his eldest son, Haw Choon, took over Boon Koon, a Penang-based rebuilt commercial vehicles manufacturer, in April 2017. Boon Koon was renamed CHGP in September 2018 to better reflect its corporate identity after it diversified into property development.

While the group’s legacy vehicle business has turned around — contributing profit before tax of RM1.64 million for the financial year ended March 2019 (FY2019) — Chiau says property will form CHGP’s core business in the coming years.

Previously loss-making, CHGP returned to the black in FY2018 with a net profit of RM8.9 million, versus a loss of RM4 million a year earlier. However, the bottom line tumbled 62% to RM3.4 million in FY2019.


Two ongoing projects

CHGP has two ongoing projects — Aera Residence and 8th & Stellar.

8th and Stellar is a two-tower mixed-use development comprising serviced apartments, duplex lofts, office space and shoplots on a 2.2-acre leasehold tract in Sri Petaling. The estimated gross development value is RM490 million.

Aera Residence is a serviced apartment project in Petaling Jaya, with an estimated GDV of RM310 million.

Aera Residence, which has a take-up rate of 97%, is expected to be completed in March this year and will start generating profit for CHGP soon.

8th & Stellar, which was half sold by the end of last year, is expected to achieve sales of 70% to 80% this year.

“We all know that the current market sentiment is not great but, fortunately, our property sales performance has been commendable so far,” says Chiau. “Last year, our overall property sales amounted to about RM200 million. With the new projects coming in, our property sales could hit the RM300 million mark in 2021.”

CHGP plans to launch the two new serviced apartment projects as early as next year, assuming the land acquisitions are completed this year.

Chiau estimates the GDV for the two new projects at RM300 million to RM350 million each. “If we were to buy the two pieces of land for RM100 million, we must launch the two projects for RM700 million in total to make a reasonable profit. Both tracts are vacant at the moment. We are not in hurry to launch them,” he says.


Shares undervalued?

On the MGO, Chiau observes that, in the present environment, general offers are not uncommon at companies listed on Bursa Malaysia and that his family is of the view that CHGP shares are underpriced by investors.

“On average, we bought Boon Koon shares for 40 sen apiece (since April 2017). Before the MGO, shares of CHGP were trading at 28 sen to 29 sen. We think our shares have been undervalued, that is why we are launching the GO now.

“Of course, we do not expect everyone to sell their shares to us. We just want to hold more shares and control the company with at least 51% equity interest. If we hold more shares, hopefully, investors would feel more confident about our company.”

The 30 sen apiece offer price for CHGP shares represents a 4.15% discount to the group’s one-year volume-weighted average market price (VWAMP) of 31.3 sen. CHGP’s listing status will be maintained.

Non-independent and non-executive director Datuk Goh Boon Koon and his private vehicle BKNT Resources Sdn Bhd, as well as Teoh Hai Hin, Teoh Huan Shim and Mohd Salleh Hashim — who collectively control 24.49% of CHGP shares — have said they will not be taking up the offer.

CHGP’s share price has declined 14% over the past 12 months, closing at 30 sen last Friday, which translates into a market capitalisation of RM88.92 million. The counter is currently trading at a trailing 12-month price-earnings ratio of 40.6 times.


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