Hua Yang’s Ipoh acquisition a positive surprise
KUCHING: Hua Yang Bhd’s (Hua Yang) recently announced Ipoh landbank acquisition came as a positive surprise to the research arm of Kenanga Investment Bank Bhd (Kennaga Research).
To recap, the property investment company announced via a filing on Bursa Malaysia that it had entered into a conditional Sale and Purhcase Agreement (SPA) with Bumi Semarak Development Sdn Bhd for the acquisition of a 3.8 acre plot of freehold land for a total cash consideration of RM15.31 million.
The announcement came as a surprise to Kenanga Research who said that they were not expecting land banking activities from Hua Yang so soon after raising its effective stake in Magna Prima Bhd (Magna) to 30.9 per cent.
The surprise was however, a positive one as the research arm noted that the particular acquisition would further boost the group’s remaining gross development value of RM4.6 billion to RM4.9 billion.
The boost comes from Hua Yang’s proposed development plans to develop 720 units of serviced apartment and 72 units of commercial shop lots on the land.
This proposed development has an estimated Gross Development Value (GDV) of RM295.1 million and implies a decent land cost to GDV ratio of only 5 per cent according to the research arm.
Hua Yang guided that the development cost for this project would come from internally generated funds.
“Excluding any plans involving Magna’s land, we expect the group’s first nine months of 2017’s (9M17) net gearing of 0.32 fold to climb to 0.66 fold post completion of the acquisition and the Magna deal.
This still falls within the management’s comfortable gearing level,” the research arm pointed out.