GuocoLand expects 18% yield from PJ City, PJ Corp acquisitions

KUALA LUMPUR: GuocoLand Malaysia Bhd expects a firm yield of 18% from the recent related party transaction to purchase PJ City Development Sdn Bhd and PJ Corporate Park Sdn Bhd from Guoline Asset Sdn Bhd and MPI Holdings Sdn Bhd respectively.

GuocoLand’s shareholders yesterday approved the resolution at an extraordinary general meeting held at Wisma Hong Leong because of the good prospects of these developments given their locations, its senior public relations manager, Leslie Lim, said.

“The company (GuocoLand) expects per annum returns of 18% from these developments and of course this will be dependent on the economic situation as well,” Lim told StarBiz, citing some research documents.

After the approvals, GuocoLand will proceed and buy PJ City for RM29.79mil from Guoline Asset; and will then purchase PJ Corp from MPI Holdings for RM258,000.

These companies house developments which are mainly parked under PJ City, including commercial land of 3 acres which already has existing buildings on them as well as an industrial land of 7.75 acres fronting Jalan 225, PJ.

GuocoLand said it would develop the industrial land for factories after tenancy agreements for the open air carpark and the cement batching plant expires on March 31, 2012.

The purchases of PJ City and PJ Corp would be funded entirely from borrowings which would increase its gearing ratio basing on its shareholders’ funds from 1.13 to 1.20, the shareholder statement said.

The purchase of PJ City also took into consideration the unaudited net tangible assets (UNTA) of PJ City of RM8.77mil as at Oct 31, 2011 and after adjusting for the total market value of the land at RM72.5mil, it said.

“Guoline Asset is a wholly-owned subsidiary of Hong Leong (Co) Malaysia Bhd (HLC) and its original cost of investment in PJ City was RM5mil,” it added.

The purchase of PJ Corp also took into consideration of the UNTA at RM258,375 as at Oct 31, 2011 while there was no valuation had been undertaken on the two units of low-cost houses owned by PJ Corp.

MPI’s original cost of investment in PJ Corp was RM265,000 which was made on May 4, 2011.

By The Star