Luster takes up controlling stake in firm developing a RM900m project

KUALA LUMPUR (Oct 26): Luster Industries Bhd is buying a 51% stake in a local private company that is jointly developing a plot of land in Sepang, Selangor, into a mixed development with an estimated gross development value or GDV of RM900 million.

The plastic injection and moulding company that has recently diversified into property development, is paying RM17.85 million for the stake in Jade Classic Sdn Bhd and has inked a share sale agreement yesterday to effect the purchase.

Jade Classic has a joint venture agreement with Compugates Development and Mining Sdn Bhd, inked in 2017, to develop the 25.09ha leasehold, vacant agriculture land.

"Based on preliminary plans, the land is proposed to be developed into a mixed development, subject to the approval of the authorities comprising 338 units of 3 storey town house, 168 units 2 storey terrace house, 954 Rumah Selangorku and 940 units of high rise mixed residential and commercial units," Luster said.

The project is estimated to be able to generate a gross profit of about RM190 million, and Luster expects to recover the return to investment from Phase 1 of the project, which has an estimated GDV of RM230 million and a gross profit of about RM57 million. The land, Luster said, can also be charged for bank borrowing.

The project's cost of RM712 million is to be fully borne by Jade Classic, which will become Luster's subsidiary on completion of the acquisition.

With its stake buy, Luster said it will fund the proposed development via a combination of internal funds and/or bank borrowings, the proportion of which has not been fixed at this juncture. The group targets to launch the project in 2020 and the development is expected to take at least 10 years to complete, with an extension of four years.

"The proposed development is also expected to be funded through the sales proceed of the units sold during the launch," Luster said.

The acquisition, Luster said, represents an opportunity for it to further capitalise on its experience and expertise in property development to develop the land. "This bodes well with the company’s strategy to grow its property development segment, either through acquisition of landbank or joint ventures with landowners," it added.

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