Hunza Properties enlarging landbank

KUCHING: Hunza Properties Bhd (Hunza Properties) is enlarging its landbank in Penang to boost its earnings and strengthen its position as a reputable property developer.

CIMB Investment Bank Bhd (CIMB) in a research report noted that the property developer has recently purchased a 42 acres of freehold land in Bayan Baru, Penang for RM82 million.

It cited that the Hunza Properties intended to develop the land into a multi-million integrated development which will serve as a mini city.

It observed that the potential gross development value (GDV) of the landbank could range between RM1 to RM2 billion based on a plot ratio assumption of two times with the pricing assumption of between RM400 to RM600 per square feet (psf).

The research firm estimated that with a 10-year development period and 25 per cent pretax margins on the GDV, the project could spur its earnings by RM27 to RM41 million annually.

It pointed out that the development of the 42-acres land was likely to be a mid to longer term project as the company’s priority will be given to its current projects which were the construction of the Gurney Paragon Mall and Alila Two project both in Penang.

Besides that, the development will also give Hunza Properties exposure to the south of Penang on top of its project in central Penang and Bertam in the mainland.

CIMB also believed that Hunza Properties’ greater presence in Penang will position the company to ride on the strength in demand for Penang properties.

Meanwhile, the 42-acre land which is located in Bayan Baru is easily accessible to Penang International Airport and the Coastal Highway which led to the existing Penang Bridge and the new bridge under construction. Its location is near Bukit Jambul golf course and the Penang sports arena.

On the funding of the purchase, CIMB said Hunza Properties does not have to spend the entire RM82 million at the time being. It noted that only a refundable deposit of 5 per cent or RM4.1 million was paid upon execution of the Sales and Purchase Agreement (SPA).

It stated that the land title was not in the name of the current trustees and were given 24 months to resolve the issue, after which Hunza Properties will be given up to seven months to settle the remaining land acquisition cost.

It also noted that the acquisition will be funded by internally generated funds and borrowings.

Hunza Properties has obtained approval for its 3-for-10 rights issue with one free detachable five-year warrant, subject to several conditions. The property developer is expected to raise RM100 million on assumptions that all the warrants were exercised with the exercise price being RM1.10 per share.

The research firm believed that the funds from the rights issue will be utilised for the construction of the Gurney Paragon Mall.

It added that potential catalyst for the company’s stock to trend upward include a better than expected sales and construc­tion progress, margin expan­sion from lower building costs and increasing investor interest in the Penang property market.

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