Kerjaya Prospek Group (KPGB) has formed a 55:45 joint venture (JV) with Aspen Vision Development SB to undertake a mixed development on a 36-acre plot of land in Seberang Perai Tengah, Penang. The proposed development will feature the construction of 338 affordable housing units, 1,680 residential units, service apartments, as well as retail shops and offices. The JV will acquire land from Railway Asset Corp (RAC), a unit under the Ministry of Transport, as a cost of RM156.5m, valued at RM54.1m in cash and the entire 338 units of affordable homes, valued at RM102.4m. While we view this positively, we are keeping our forecast unchanged pending further details on the proposed development. We maintain our Neutral call on KPGB with an unchanged SOTP-based TP of RM2.00.

• RAC is a federal statutory body established under the Railways Act 1991 [Act 463] with functions that include managing, administering and maintaining assets related to railway and its ancillary facilities, as well as to undertaking projects for the development or redevelopment of Malaysia's railway industry.
• The said land is located in Perai, Penang, measuring a total area of approximately 36.0 acres, is strategically positioned between the Perai River and Taman Inderawasih. The said land is also in close proximately to Penang Sentral, a major transportation hub that will feature a Light Rail Transit terminal as part of the Penang LRT project.
• Salient details of the JV. Kerjaya Prospek wholly owned subsidiary Futuprop SB, and Aspen Vision will form a 55:45 JV company named Rivanis Ventures SB to undertake the development. The Proposed Development will comprise 338 units of affordable housing, 1,680 residential units, 1,680 serviced apartments as well as commercial retails shops and offices. It is planned to be completed in stages over a seven-year period. Additionally, Rivanis Ventures will have the first right of refusal to develop the adjacent 19.7-acre land.
• Consideration. The JV company will acquire land from RAC for RM156.5m, comprising RM54.1m in cash and 338 units of affordable homes, estimated to be worth RM102.4m, taking into account the construction cost and costs associated with relocating the current occupants on the Said Land.
• Our View. Overall, we view this proposed development positively, as it is expected to contribute to the Group's earnings via two income streams: construction and property development over the project's duration. However, we make no adjustment to our earnings estimates pending further details and the signing of the definite agreement.

Source: PublicInvest Research - 12 Nov 2024