- Kimlun Corp Bhd is buying 41 vacant lots of land in Shah Alam for RM28.9mil from Melati Ehsan Holdings Bhd’s unit, Bayu Melati Sdn Bhd (BMSB).

- Kimlun intends to build bungalows on the parcels of land, measuring 386,499 sq ft in total.

- The 41 land parcels are located next to the Bukit Cherakah forest reserve and surrounded by housing development such as Bukit Jelutong, Sunway Kayangan, Sunway Alam Suria and Cahaya SPK. It is 5km away from the entrance to the Guthrie Corridor Expressway.

- The 41 lots have 99-year leaseholds expiring on 27 Jan 2103.

- The group intends to fund the cash acquisition via a mix of internal generated funds and borrowings. While the quantum is yet to be fixed, if 69% of the acquisition is funded by borrowings, the group’s gearing ratio is expected to rise by 0.07x to 0.7x.

- The owner of the lots is Tengku Shahrudin Sdn Bhd, which has granted the development rights to BMSB. As such, the acquisition is conditional upon that the development agreement is still valid, and a discharge of an encumbered lot from a charge to Public Bank.

- The acquisition is expected to be completed in 3QFY14.

- At this juncture, there are no details on the proposed project and its indicative gross development value (GDV). Nevertheless, we view the purchase positively given the land’s strategic location.

- This will be the third property development project after its maiden Hyve project (GDV: RM250mil, 80% take-up rate) and the upcoming Opus Medini (RM446mil, launch in 2HFY14). In FY13, Hyve contributed RM19mil (2% of total revenue) with a 26% gross profit margin.

- We maintain BUY with a fair value of RM2.00/share, pending a meeting with management later this month. 

Source: AmeSecurities