Property company EcoFirst Consolidated Bhd has been in the news recently. Its shares have been heavily traded over the last two weeks.
The reason was finally known yesterday - the emergence of a new shareholder – Datuk Michael Chooi Yoey Sun, best known as the co-founder of kitchen cabinet and wardrobe systems manufacturer Signature International Bhd.
Pic: Datuk Michael Chooi Yoey Sun
Yesterday, Chooi emerged with a 5.16% stake in EcoFirst. His shares were purchased in the open market as well as via off-market transactions.
The market gave its approval, with EcoFirst shares rallying up by 8.7% to 56 sen as of Monday’s close.
Within corporate circles, Chooi is known for his sales and marketing prowess particularly in the property and construction sector. He is known to create new ‘wants’ and then opening up markets for it.
Chooi Is known for making Signature Kitchen a household brand, and making the kitchen a key selling point for many new upmarket properties.
Who is Datuk Michael Chooi?
For the past decade, Chooi is best known for co-founding built-in kitchen and wardrobe systems company Signature International Bhd with his partner Tan Kee Choong in 1994.
Known as a sales and marketing specialist, Chooi grew Signature, where its kitchen cabinets soon made its mark in many of Malaysia’s upmarket property projects. Chooi further grew Signature’s overseas presence via some 15 markets via dealers.
Today, Signature typically has annual revenue of between RM100mil to RM150mil and a retail network of 29 outlets.
Chooi made a fortune in 2021 after Chin Hin Group Bhd acquired a 31.2% stake in kitchen and wardrobe systems supplier, Signature International Bhd for RM93.6 million cash or RM1.17 per share.
Chooi directly sold 15.6% of his personal stake in Signature to Chin Hin for this deal. This would mean he roughly pocketed RM45mil.
Following that, as of April 2021, Chooi stepped down as director of Signature to pursue other opportunities. This was when he started emerging in other companies.
Last Sept, Chooi emerged with a 12.878% stake in Scanwolf Bhd - a Perak based company involved in property as well as the development of plastic extrusion.
As the market probably recognised Chooi’s ability to grow and value add a business, Scanwolf’s share price rose from the 44 sen level in Sept to a high of 86 sen in early Nov.
Now Chooi appears to have his eyes set on EcoFirst.
Investors are starting to notice undervalued property stocks after years of doldrum. Some of these property companies own huge tracts of land bought at deep bargains.
What does Chooi see in EcoFirst?
The MRT3 theme is back on in 2022!
Talks about the RM40bil to RM50bil Mass Rapid Transit 3 (MRT3) project has started to circulate among corporate circles and construction players.
Behind the scenes, players are preparing, not just with their bids, but with the funding portion, as it is now a known fact that MRT Corp is proposing to use a hybrid model to finance the MRT3 project.
For a recap, the MRT3 Line is also known as the Circle Line, and will connect all the existing urban rail lines in the Klang Valley.
It will play the crucial role of cutting short the distance for those who need to transfer between the MRT lines (Kajang and the upcoming Putrajaya), LRT line (Kelana Jaya, Ampang/Sri Petaling), as well as the KTMB Komuter lines.
The Circle Line will form a loop or orbital line that encircles Kuala Lumpur’s city core, and will have about 10 interchange stations among the 30-plus MRT3 stations.
The line is expected to span 50km (40% of which will be underground), and will serve currently underserved areas such as Sri Hartamas, Mont Kiara, Sentul, and Cheras among others.
Construction for this mega project is planned to commence in 2022, with all phases estimated to complete sometime around 2030
So, any early beneficiaries for the MRT3?
EcoFirst - land right next to MRT3. Prime land bought at cheap cost
One property player which has its landbank in the vicinity of the upcoming Hill View MRT station is EcoFirst Consolidated Bhd.
EcoFirst is a mid-sized property player with landbank in Ampang, Sungai Besi, Shah Alam and Damansara Damai.
Financials wise, the company has been profitable over the last decade, which is commendable despite the challenging property outlook.
Furthermore, it has a record of achieving a takeup rate of more than 95% for its launches whether rain or shine.
Now, the crown jewel of its landbank is its flagship development - the Ampang Ukay mixed development, which is a seven phased project on an 87-acres of land situated in Ukay
There aren’t many developers with huge tracts of land for township development anymore.
Furthermore, this land is in the vicinity of the upcoming Hill View MRT station, which will likely be only 300m away, or a 5 minute walk.
So far, 7 acres of this Ampang land has been developed. It still has 80 acres left with a gross development value of some RM8bil.
EcoFirst is currently in the development planning stage for the next phase of its Ampang Ukay flagship, likely to be launched in the second half of 2022.
As EcoFirst bought this land 9 years ago, the land cost is cheap especially in comparison to its potential GDV of RM8bil. It would be roughly 5% of GDV.
To put things in perspective, for each property it sells there, let’s say at RM700 per square feet (psf), only RM36 consists of land cost.
This would suggest attractive profit margins for the development of this 80 acres of land over the next 5 to 10 years.
Also gearing up for MRT2
On Dec 30, 2021, EcoFirst announced that it had completed the acquisition of seven parcels of land at Jalan PJU 10/1A, Damansara Damai, Petaling Jaya for RM70mil.
This land was purchased via a combination of cash and shares, and also resulted in the vendor, Datin Janaki Palaniappan emerging as a substantial shareholder of the company.
On Dec 27, 2021, a filing to Bursa showed that Janaki has emerged with a 5.16% stake or 60 million shares.
So why buy land when the property market is soft?
Well, the group sees an opportunity to increase its landbank within an area currently being developed to incorporate a MRT2 station.
The Damansara Damai MRT station is one of the elevated stations on Sungai Buloh-Serdang-Putrajaya Line (SSP Line).
The station is located besides Desa Aman Industry Park, Kepong and is walking distance to the Damansara Damai Medical Center.
Ecofirst recently completed Phase 1 Ampang Ukay flagship development known as Liberty Arc.
Other completed projects include residential and commercial developments such as Taipan@Ipoh Cybercentre in Perak, 1Segamat Mall in Johor, South City Plaza shopping centre and The Academia in Seri Kembangan, Selangor, as well as Kondominium Kelab Golf in Perak.
The group also manages the leasing and administrative functions for South City Plaza Mall and the retail areas in Seri Kembangan and Liberty @ Ampang Ukay, respectively, under its property investment arm.
Stock is relatively controlled
At its current price of 54 sen, the stock has a market cap of RM.635.11mil based on 1.18 billion of shares. As of its latest results, the stock has a net tangible asset of 44sen.
A check on its 2021 annual report shows that the top 30 shareholders control roughly some 70% of the stock.
Earnings wise, the company made a loss of RM2.1mil on the back of revenue of RM2.72mil for its first quarter ended Aug 31, 2021. This was predominantly due to Covid-19.
For full financial year ended May 31, 2021, EcoFirst’s revenue was down by 71.7% to RM42.40mil compared to RM150mil in FY2020, due to the postponement of launches.
Nonetheless, net profit only dropped to RM13.6mil compared to RM17.1mil in FY2020.
This was mainly due to increase in revenue from property development segment, fair value gain of RM13.7mil on the investment property and reversal of over provision in tax liability of RM4.5 mil.
The company is looking to make a comeback in 2023, anchored on the good location of its landbanks as well as the affordable prices of its properties.
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