Thursday 28 Mar 2024
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KUALA LUMPUR (May 18): Lion Posim Bhd is forming an unincorporated joint venture (JV) to undertake a mixed residential and commercial development in Shah Alam, with a gross development value of RM867 million.

The group, via its unit Lion Posim Waterfront Sdn Bhd on Wednesday (May 18) entered into a conditional development agreement with a unit of Selangor Menteri Besar Inc, Landasan Lumayan Sdn Bhd, for the development on a parcel of land to be alienated by the Selangor State Government to Landasan Lumayan, measuring approximately 26.29 acres in Section 24, Shah Alam.

“The land is accessible via Federal Highway, Lebuhraya Kemuning Shah Alam (LKSA) and Konsortium Expressway Shah Alam Selangor (KESAS) and has a long river frontage of Sungai Klang and is mostly surrounded by low and medium-end housing. The area is densely populated, which is suitable for residential development. Currently, there are no new developments of residential and commercial properties in Section 24, Shah Alam.

“Based on the company’s preliminary conceptual plan, the project comprises 200 units of townhouses, 1,106 apartment units, 648 units of affordable housing, 16 commercial shop lots and a clubhouse, to be developed in stages over the expected 10-year development period,” Lion Posim said in a bourse filing.

Lion Posim said the project, which is expected to contribute positively to the group’s earnings, will provide an alternative source of income for the group in addition to its existing businesses, mainly in trading and distribution of building materials and steel products, automotive lubricants and parts.

The total GDV and total gross development cost of the project are estimated at RM867 million and RM651 million respectively, based on a market study.

The estimated initial working capital required for the proposed unincorporated joint venture is RM50 million, which is expected to be funded via internally generated funds of the group.

Barring any unforeseen circumstances, the conditions precedent stated in the development agreement are expected to be fulfilled by the second half of year 2022.

Property development activities may contribute 25% or more to net profit

Lion Posim posted a profit after tax of RM9.07 million on a revenue of RM476.01 million in the financial year ended June 30, 2019 (FY19). In FY20, it posted a profit after tax of RM31.74 million on a revenue of RM411.5 million.

For the 18-month period ended Dec 31, 2021 (FY21), the company registered a profit after tax of RM141.19 million on a revenue of RM871.81 million.

Looking ahead, Lion Posim said it may also undertake other property development projects when opportunities arise, Moreover, it anticipates that the new property division may contribute a quarter or more of the company’s net profits or result in a diversion of 25% or more of the net assets of the group.

“In turn, property development activities are expected to contribute positively to the future earnings of the group, premised on the prospects of the property market in Malaysia. In view thereof, property development activities are expected to be one of the core businesses of the group, moving forward.

The company will be seeking shareholders' approval for the proposed diversification at an extraordinary general meeting to be convened.

Lion Posim shares closed down one sen or 1.75% to 56 sen on Wednesday, for a market value of RM129.68 million.

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