By Khairie Hisyam
Property developer Eco World Development Group Berhad is seeking partners to invest in a subsidiary which has just signed a land deals worth a total of RM1.2 billion, potentially divesting up to 70% of its stake in the company.
In a regulatory filing, Eco World announced that the subsidiary, Paragon Pinnacle Sdn Bhd (PPSB) has inked five separate sale and purchase agreements for some 26 land parcels measuring a collective 2,198 acres in Kuala Selangor from four separate vendors, with the total purchase price coming to RM1.2 billion.
While Eco World stated it intends to foot the purchase bill through a combination of internal funds and bank borrowings, equity funding remains a possible avenue being explored, it said to the stock exchange.
“Eco World wishes to highlight that its management is in the process of refining its partnership for growth business model to raise equity funding at the project level,” the company said to the stock exchange. “This will enable it to acquire sizeable strategic lands without over-extending the balance sheet of the Group.”
To do so, Eco World wishes to solicit institutional, private equity and corporate partners to co-invest in and fund PPSB which will result in a potential reduction of Eco World’s stake in the company — this would also proportionally reduce the company’s obligation to fund the proposed acquisitions.
“Under the Business Model, Eco World intends to retain a minimum of 30% equity stake in PPSB to ensure that the Group will continue to enjoy a meaningful share of the development profits,” added the company. A subsidiary of EW Berhad will be appointed as the development manager to manage the entire project … this will create a fee-based income stream for the group.”
Led by a group of former senior SP Setia executives including former long-time chief Liew Kee Sin, Eco World had seen fast emergence over the past few years since a reverse take-over involving then-Focal Aims Holdings by Eco World Development Sdn Bhd to become a listed entity.
On Sept 17, the company posted a mere RM1 million revenue for the third quarter ended July 31, 2015 (3Q15) which translated into RM24.3 million in net profit.
However the group had been raking in strong sales of RM2.37 billion in the ninth-month period to-date, with some RM1 billion registered in the third quarter alone.
At the noon bell, Eco World was down 4 sen at RM1.50 per share.
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