PKNS Andaman Sdn Bhd the biggest subsidiary of the Andaman gourp will embark on a reverse takeover of Ecofirst in a share plus cash deal claimed sources.  The indicative offer price is in the range of 45 sen and will be completed soon as time is of the essence in this deal. It is also a related party transaction as both groups are related and share a common director , Dr Teoh Seng Foo. Sources say that Dr Teoh wants to consolidate all his projects to strengthen their position in view of the increasingly challenging property market. The article below confirmed that an exercise is the making.

http://www.starproperty.my/index.php/articles/investment/ecofirst-to-raise-funds-for-rm145mil-land/

       The new company will eventually be renamed Andaman Property Berhad and PKNS  expected to emerge as a substansial shareholder in the new entity. PKNS Andaman is joint venture company between PKNS and the Andaman group. The group is currently developing a mixed development in Bangi with a GDV of around 500mil. The Andaman group has realized a GDV of more than Rm2bil since its inception an the figure is expected to hit RM3 bil taking into account all the ongoing projects. PKNS Andaman Sdn Bhd is a company with a strong balance sheet and achieved a net profit of over Rm50mil last year.

    The Andaman group has had plans to seek listing for quite some time. Ecofirst will be used as a way of backdoor listing for the group. Other projects in the Andaman group will be injected into the new entity.Those ongoing are Diamond residence in Serdang and Scott Tower in Johor Bahru. Both have a GDV close to Rm500 mil,.    Listing status is expected to raise the profile of Andaman and gives it the opportunity to expand even further as a niche developer. Management has made it clear that they do not intend to venture into saturated areas such as KL city center and is happy t ofocus on more secondary locations.   

      There are numerous synergies between Ecofirst and Andaman. Andaman is a fully fledged developer and Ecofirst has significant track record in the construction sector. EF has completed numerous projects such as SEGI university in Kota Damansara , the National Youth Training Institute as well as various condominiums. Both parties also overlap each other in one project in South city plaza serdang and the merger will eliminate that. Closer co-operation will result in a win win situation for both parties as Ecofirst also owns the mall below the upcoming service apartments which will be developed by Andaman

       Andaman is expected to derive synergy from significant cost savings in the construction of its projects as it longer has to outsource its construction activities. Construction can be undertaken by Ecofirst and this will result in substansial cost savings as construction will be done in house as Ecofirst stands to gain from the expertise of Andaman in property development althoughmanagement control is expected to be surrendered to Andaman. Andaman is a nichedeveloper focusing on service apartments in areas with mass market for rentals.

     Andaman thrives on developing service apartment in close proximity to education institutions such as SEGI , Inti and Taylors in Subang Jaya. The strategy enables it to tap into a huge student rental market and this has enabled the company to offer Guranteed rental return scheme to some of its buyers, increasing the appeal of someof its projects and also giving the company recurring income .The majority of their completed projects are in the Subang USJ Kota Damansara coriddor which has huge college student population to tap into. Demand fortertiary education is inelastic and the rental market is not expected to be adverselyaffected by economic slowdown. Therefore, Andaman is expected to face minimal headwins should the property market slowdown due to its niche position.

        Sources also claimed that shareholders and directors of Ecofirst may not much choice but to accept the offer as time is running out. Ecofirst must pay MCIS Zurich RM145mil by the end of Mac for an Ulu Kelang land purchase. Pa yment had been extended twice and is unlikely to be extended again. Ecofirst risk losing the project should it fail to pay by then. Diversifation into property is an integral part of Ecofirst turnaround plan. The company turnaround after being in the red for a few years till 2010. Ecofirst has Rm17mil in cash and more than RM150 mil in borrowings and is unlikely to be able to raise debt financing due to its high gearing  

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