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Friday, September 13, 2013

Property development to play significant role for Salcon


KUALA LUMPUR: Salcon Bhd expects its property development business to overtake its water and wastewater services business in a year or two.

Executive director Datuk Eddy Leong said this was due to higher volatility in the water business.

He said there could be periods of draught and “ if we have the projects lined up, we could start to see more consistent earnings,” he said at a briefing yesterday held in conjunction with its signing ceremony with Beijing Enterprises Water Group Ltd to dispose of its entire investment in China.

Salcon is selling six of its water assets in China to Beijing Enterprises Water Group for a total of 955 million yuan (RM518.3mil). Together with its joint venture company Salcon Water (Asia) Ltd, it entered into two sale and purchase agreements (SPAs) with the Hong Kong listed Beijing Enterprises Water Group.

The first SPA is between Salcon, Salcon Water (Asia), and Beijing Enterprises Water Group for the disposal of Salcon Fujian (HK) Ltd, Salcon Zhejiang (HK) Ltd, Salcon Linyi (HK) Ltd, and Salcon Shandong (HK) Ltd for 88 million yuan, 150 million yuan, 130 million yuan, and 280 million yuan respectively.

Meanwhile, the second SPA is between Salcon and Beijing Enterprises Water Group for the disposal of Salcon Darco Environmental Pte Ltd for 212 million yuan and Salcon Jiangsu (HK) Ltd for 95 million yuan.

Once the exercise is completed, Salcon will bring in RM284mil in cash and will contribute RM94.6mil to the group’s profit. Leong said the disposal unlocks the value of its investments in China.

“After the sale of the assets, we will literally have zero borrowings. There are lots of opportunities for us to invest our money. We will take our time to look for good deals,” he said.

The proceeds from the disposal will also fund the expansion of its landbank expansionin Klang Valley, Johor and Penang.

The disposal of the group’s China assets allows Salcon to retain a healthy balance sheet with improvements on its earnings per share from 2.21 sen to 16.9 sen, and net asset per share from 80 sen to 91 sen.

The entire disposal consists of six concessions, one waste water concession and two raw water concessions located in the Fujian Province, Zhejiang Province, Jiangsu Province and Shandong Province.

The company also announced that via its 50% owned subsidiary Nusantara Megajuta Sdn Bhd, it has signed a letter of intent with Eco World Development Sdn Bhd to jointly develop two pieces of land in Johor Baru.

Salcon had acquired the two pieces of land amounting to 51,476 sq m via Nusantara Megajuta for RM99.7mil.

The estimated mixed development project will comprise retail outlets, serviced residents and strata shop-cum-apartments, and is scheduled for launching next year. Leong said he expects the gross development value of the project to be more than RM1bil.

The joint development will entail Eco World Development acquiring 100% shares of Kembar Makmur Sdn Bhd, which owns the remaining 49.99% shares in Nusantara Megajuta.A shareholders agreement with Kembar Makmur is expected to be executed in a month’s time to formalise the agreement.

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