KUALA LUMPUR: Agro-chemical producer Halex Holdings Bhd, which is upping its stake in property developer Kensington Development Sdn Bhd to 75% from 25% for RM32 million, wants to make the property segment a major revenue contributor to the group.
Halex executive director Benny Lim said the group currently has minimal exposure to the property segment, via its wholly-owned unit Halex Realty Sdn Bhd.
But it hopes its investment in Kensington Development will help change that.
Halex Realty was formed over two decades ago to acquire a small piece of agricultural land in Sedili, Johor.
“However, as the management later diversified into and focused on growing the healthcare disposables, horticulture, and later the biotechnology businesses, this small investment was retained without further development,” Lim told The Edge Financial Daily in an email reply.
The group has two other land banks in Ulu Tiram and Taruka, Johor Baru.
On Oct 1, 2014, Halex accepted a conditional offer by Bestempire Ltd to acquire up to 2.5 million shares or a 50% stake in Kensington Development, via Halex Realty, for RM32 million cash. This is on top of an existing 25% stake it acquired for RM22 million in April this year.
“We have accepted the offer from [Bestempire] to acquire another 50% in Kensington Development, but this will be subject to a due diligence audit and shareholders’ approval,” said Lim.
“This acquisition in Kensington Development represents an extension of this [property] business as the management feels that this would be an opportune time to seriously develop and grow this business into a significant business segment for the group,” he said.
Kensington Development owns 15.43 acres (6.2ha) of land in Kota Kinabalu, Sabah, which is planned for a mixed development known as 8 Avenue. The project will encompass a shopping mall and a small office-versatile office (SoVo) block on a two acre piece of land, with a gross development value of RM150 million over the next three years.The 8 Avenue project will be jointly developed by Kensington Development and Bina Puri Properties Sdn Bhd, a wholly-owned subsidiary of Bina Puri Holdings Bhd.
The remaining 13 acres of land, which will feature commercial and residential units, is being planned, said Lim, adding that the development will have a potential GDV of RM1.1 billion over the next six to eight years.
“Despite this venture being Halex’s first active foray into property development, with Kensington Development’s team having the required knowledge and experience in this industry, we believe this will only be one of many development projects embarked on by the group,” said Lim.
However, until the acquisition of the additional 50% stake in Kensington Development is completed and the development projects planned are in full operation, he said Halex’s core business will consist of its existing three segments.
Currently, Halex’s core businesses include the manufacturing of agro-chemical and healthcare disposables, horticulture and agro-biotechnology. Lim said the group will continue to also expand its core businesses despite the diversification into property.
Based on its 2013 annual report, the group’s agro-chemical segment contributed about 52% of its total revenue, while its healthcare disposables and horticulture and agro-biotechnology segments accounted for 42% and 6% of its revenue respectively.
Halex reported a net profit of RM3.51 million for the financial year ended Sept 30, 2013 (FY13), down 20% from RM4.39 million the previous year, while revenue fell to RM96.38 million from RM102.04 million in FY12.
Shares in of Halex closed down 0.59% at 84.5 sen last Friday, with a market capitalisation of RM89.55 million.
This article first appeared in The Edge Financial Daily, on November 3, 2014.