Eddie Ong buys into Hektar REIT, says no plan to merge with KIP REIT for now

• In a bourse filing on Wednesday, Hektar REIT said Ong acquired 42.8 million shares or an 8.465% direct interest in the company. He also deemed interest in the company via Hextar Rubber Sdn Bhd with 101.1 million shares or a 19.997% stake.

KUALA LUMPUR (Dec 6): Agrochemical businessman Datuk Eddie Ong Choo Meng has emerged as a substantial shareholder in Hektar Real Estate Investment Trust (Hektar REIT), after acquiring a 28.462% stake, or 143.9 million shares, in the company.

Ong is no stranger to the investing community, given his interests in various local listed firms.

Notably, Ong is also a major shareholder in listed companies such as Hextar Global Bhd, KIP REIT, Hextar Healthcare Bhd (Rubberex Corp (M) Bhd), Hextar Industries Bhd (formerly known as SCH Group Bhd), Hextar Technologies Solutions Bhd (formerly known as Complete Logistic Services Bhd), Hextar Capital Bhd (formerly known as Opcom Holdings Bhd), as well as Classic Scenic Bhd and Perak Transit Bhd.

In a bourse filing on Wednesday, Hektar REIT said Ong acquired 42.8 million shares or an 8.465% direct interest in the company. He also deemed interest in the company via Hextar Rubber Sdn Bhd with 101.1 million shares or a 19.997% stake. Both blocks were bought on Monday via direct business transactions.

Bloomberg data showed that the transaction cost 89 sen per share, translating into RM128.07 million for an about 29% stake in Hektar REIT.

The transaction price is higher than Hektar REIT's closing price of 63 sen on Wednesday — after it closed up 0.5 sen or 0.8%.

At 63 sen, Hektar REIT is valued at RM319 million.  The counter is currently trading at a historical price-earnings ratio of 4.71 times.

According to Bloomberg data, there were five tranches of off-market transactions on Monday. Four of them were priced at 89 sen per share while the remaining block of 10.56 million shares was transacted at 65 sen apiece.

The largest block amounted to 101.1 million shares, changing hands at 89 sen, while the volume of the remaining three transactions at the same price totalled 42.8 million shares.

When contacted by The Edge, Ong said he bought into Hektar REIT because of its long-term value.

Ong, however, acknowledges that at the moment, there are no synergies to be derived between KIP REIT and Hektar REIT.

“There is no plan for us to merge KIP REIT and Hektar REIT. Both of them will operate separately,” he said.

Ong owns a 20.875% indirect interest in KIP REIT and a 0.859% indirect stake in the REIT. Its investment portfolio includes AEON Mall Kinta City as well as the KIP Malls in Selangor, Johor, Melaka and Negeri Sembilan.

In an exclusive interview with The Edge in October, Hektar REIT executive director and CEO Johari Shukri Jamil said the group was diversifying its portfolio to include the education and industrial sectors as it adapts to changing market dynamics.

Hektar REIT is the country’s first listed retail-focused REIT. Its property portfolio includes Subang Parade, Mahkota Parade, Wetex Parade and Kulim Central.

Johari said exploring new business segments would allow the REIT to uncover new opportunities that can bring new revenue streams and mitigate risk from reliance on one sector.

Hektar REIT, just like its peers, was severely affected by the global Covid-19 pandemic and the lockdowns imposed by the government to curb the spread of the virus.

It posted two consecutive years of losses for the financial years ended Dec 31, 2020 (FY2020) and FY2021, suffering a net loss of RM24.09 million in FY2020 and RM31.5 million in FY2021, compared to a net income of RM39.61 million in FY2019. But it managed to recover quickly post-pandemic, having posted a net income of RM78 million in FY2022, thanks to pent-up demand.

However, its net income in the nine months of 2023 (9MFY2023) was down 32.04% year on year (y-o-y) to RM23 million, from RM33.82 million previously, on higher finance costs. 9MFY2023 saw Hektar REIT’s net property income fall 5.25% y-o-y to RM46.09 million, from RM48.64 million previously.  It booked revenue of RM83.96 million, a 6.24% y-o-y decline from RM89.55 million in 9MFY2022.

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