KUALA LUMPUR: A merger and consolidation exercise between PJ Development Bhd (PJD) and OSK Property Holdings Bhd is expected to materialise soon.
Veteran stockbroker Tan Sri Ong Leong Huat said the exercise “will be quite soon”.
Ong is chairman of PJD as well as the managing director and chief executive officer of OSK Property.
“If you have two companies doing the same thing, and if it can be consolidated into a bigger entity, you can have more power, more efficiency, and more economies of scale,” he told a press conference after PJD’s EGM yesterday. “It is not our intention to privatise but rather to synergise.”
The consolidation will result in the creation of a first-tier property developer.
“At the moment, we are second-tier developers, but combined, we will be a first-tier property developer,” he said.
‘First-tier’ constitutes a company with an annual turnover of RM3bil, Ong said.
Talks of the merger first surfaced when Ong emerged as the largest shareholder in PJD in November 2013. Ong has a 21.4% stake and 62.65% in PJD and OSK Property respectively.
Meanwhile, he expects PJD’s net profit to grow by 20% for the financial year ending June 30, 2015. “This will be backed by the advancement of certain projects, with the majority of it coming from YOU City @ Cheras, among others,” he said.
He added that PJD had RM1bil in unbilled sales, which would be realised within the next two years.
The company, with total gross development value (GDV) currently at between RM5bil and RM6bil, is expected to launch a few projects in Kuantan, Gohtong Jaya, as well as the third phase of YOU City in the next few months.
PJD has some 1,000 acres of landbank, which will be developed over the next five years.
“We have got enough for us to continue launching projects, while not being over burdened by landbanking costs,” said Ong.
Yesterday, PJD received unanimous shareholder approval to purchase about 2ha of freehold land in Melbourne, Australia for RM432.1mil, equivalent to RM21,307 per sq m. The land, which is its first major project overseas, has been earmarked as a mixed development with a GDV of between RM8bil and RM9bil, said Ong.
He added that the project would comprise residential blocks, office towers, a retail mall and a boutique hotel. He expected development works to commence late next year and be completed within five to seven years
Ong said once completed, PJD would retain some of the commercial units to generate recurring income for the group.
He said PJD would be funding the acquisition primarily via internally generated funds while the remainder would be through bank borrowings. Ong said that historically profit margins were much higher in Australia. “In Malaysia now, they are between 15% and 20%. Margins are much higher there,” he said.
He added the company would continue looking for opportunities around the region.
“The movement of people is very fluid these days. Businesses have to follow where the demand is. We want to go to areas where we can get better pricing and demand for our projects,” he said.
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