Johan Holdings Bhd is having an extraordinary general meeting this month for shareholders to vote for the proposed sale of land in Puchong, Selangor for RM127 million to OSK Group, which it had intended to develop on its own in 2017.
The group had in October 2017 announced a plan to develop part of a parcel of land in Puchong where it owns a ceramics tiles manufacturing plant via its wholly-owned subsidiary Prestige Ceramics Sdn Bhd (PCSB).
PCSB had been operating the plant up until August 2017 when it ceased its operations as it has been bleeding losses for six years.
The site, measuring 10.9 hectares, has been vacant since then.
Johan said it had applied to the Sepang Municipal Council for a development order for the development of about 2.4ha of the land.
The first phase was intended to be a mixed development comprising serviced apartments and commercial projects, with a projected gross development value of RM364.4 million.
It said, the gross development cost, inclusive of revalued land cost, is projected at RM294.9 million, giving a projected gross development profit of RM69.5 million.
Last November, Johan said in a filing with Bursa Malaysia that PCSB inked a deal with Aspect Potential Sdn Bhd (APSB) for the proposed disposal of the parcel of land in cash and in kind.
As part of the deal, Johan will receive industrial properties in kind in Selangor that will generate additional recurring income for the group.
APSB is a wholly-owned subsidiary of OSK Property Bhd, which in turn is 99.93 per cent-owned by OSK Holdings Bhd.
Johan said APSB will pay for the land via a combination of cash totalling RM108 million, and payments in kind amounting to RM19 million.
The settlement in kind includes three units of three-storey terraced factories located at Gravitas, Shah Alam, and four units of retail lots (with car park bays) located at USJ One, Subang Jaya.
Johan intends to keep the factories and retail lots for investment purposes, to generate recurring rental income and for capital gain to the group in the event there is a demand for the properties at a higher sale price moving forward.
"The market outlook specifically on the commercial properties within Selangor was an improving trend. As such, the board expects that the demand and the take-up rate for these properties will appear positive moving forward," it said.
The factories and retail lots have a total market value of RM12.67 million and RM6.4 million, respectively.
Johan said the properties are strategically located in the relatively mature and established areas within Klang Valley.
Gravitas is located within an established industrial hub of Shah Alam. Within this locality, there are multinational companies, logistics companies, and manufacturers sited, coupled with the well-structured residential areas in the surrounding areas.
USJ One, on the other hand, is located at a fast-maturing commercial and industrial area within Subang Jaya. Commercial developments are seen within this area such as hypermarkets, Mydin Mall, serviced apartments, One City Mall, Riverdale @ USJ One Park and several other major developments.
"The board expects that the future demand for the properties to be encouraging premised on the strategic location, the internal design of the properties and the population surrounded within the localities of the Properties," said Johan.
The units at Gravitas, Shah Alam have a modern design, which reflects a contemporary light industrial development within an already established light industrial development area.
Johan added that it is not expected to incur any significant costs on these properties as they are newly constructed and in good condition.
Meanwhile, the land that APSB is acquiring from Johan is located along Jalan Meranti Jaya 16 within Taman Meranti Jaya. The immediate surroundings of Taman Meranti Jaya are detached factories, vacant industrial lands, and large industrial premises.
Johan said it is selling the land to realise the property at prevailing market value.
Additionally, it serves as an opportunity to divest the currently dormant property, which Johan has no further plan nor there is any financial contribution from the property to the group.
Johan said the proceeds (from the land sale) received will strengthen its cash flow for its intended purposes. It will utilise RM14.75 million for repayment of the loan, and RM26 million for investment and business opportunities.
The group said it is in the midst of exploring its options to identify suitable new investments that include travel and tour businesses to augment the group's Diners World Travel business in Malaysia and Singapore, among others.