KUALA LUMPUR (Oct 30): O&C Resources Bhd has acquired a substantial stake in Masbe Coffee Sdn Bhd (MCSB) for RM5 million, paving the way for the company to develop a piece of land on Jalan Yap Kwan Seng into a property development with a gross development value (GDV) of RM204.94 million.
In a statement today, O&C Resources (fundamental: 1.25; valuation: 0) said it has inked a share sale agreement (SSA) with Makok Intl Sdn Bhd (MISB) to acquire 51% of MCSB for RM5 million, providing O&C Resources the rights to develop the 0.15ha freehold land at Jalan Yan Kwan Seng.
“As the subsidiary of MISB, MCSB is principally engaged in the business of real property and housing development and will be developing the piece of freehold land at Jalan Yap Kwan Seng, Kuala Lumpur, measuring 0.15ha,” the statement read.
The approved development on the land was a block of service apartments, with 145 units. The company noted that MCSB may apply for a revision of the development order upon finalisation of the new joint venture agreement.
The estimated gross development cost for the proposed development will be RM94.49 million, which the company intends to raise through a combination of fund raising exercise, internally-generated funds and bank borrowings.
O&C Resources, which is involved in the manufacture, trading and marketing of high quality babycare accessories, medical contraceptive condoms and toys, said the acquisition will be funded by internally-generated funds and/or bank borrowings, which will be determined at a later stage.
The acquisition is expected to be completed within 30 days from the date of execution of the SSA, following which MISB and MCSB will execute a new joint venture (JV) agreement, a shareholder agreement and a power of attorney in respect of the development of the land.
O&C Resources executive director Billy Ong Kah Hoe said the acquisition is in line with the company’s strategy to grow and diversify its business operations with better growth.
“Property development is the key driver in turning around O&C Resources in the future,” he said.
He said the proposed development is expected to commence within one year from the execution date of the JV and the development period will be over three years.
In a filing with Bursa Malaysia, O&C Resources said the acquisition is in line with the company’s strategy to diversify its business operations to turn profitable with a sustainable growth, as well as to balance its income stream from non-traditional sources to lessen future negative industry impact to its traditional business industry.
“Currently, O&C Resources Group’s businesses are very much dependent on global demand trends and economic outlook, and OCR sees the acquisition to balance out the over reliance on this, as the construction and property development industry in Malaysia is consistently seen to be robust, due to the investment preference of locals and even certain foreigners in preferring local real estate investments,” it added.
O&C Resources, formerly known as Takaso Resources, have been suffering losses since 2006. It sank further into the red in its fourth quarter ended July 31, 2015 (4QFY15), after reporting a net loss of RM4.88 million, compared to a net loss of RM3.01 million in 4QFY14.
On a cumulative full year basis, net losses for the financial year ended July 31, 2015 widened to RM7.99 million, from RM5.95 million in the previous year.
Revenue contracted 20% to RM6.35 million, from RM7.94 million previously, due to the slowdown in its computer accessories business.
Full year revenue was weaker at RM36.76 million, down 2.1% from RM37.56 million a year ago.
O&C Resources shares closed unchanged at 48 sen, with a market capitalisation of RM98.79 million.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)