Gagasan Nadi Cergas buys student hostel management concession for RM185m

• According to Gagasan Nadi, KPSSB had in 2013 secured concession agreements to develop and maintain student hostels at campuses in Banting, Ipoh, Port Dickson, Johor Bahru, Seberang Prai, Jeli and Kota Bahru until 2036.

KUALA LUMPUR (Nov 5): Construction player Gagasan Nadi Cergas Bhd (KL:NADIBHD) is buying two companies for RM185 million, cash, to gain control of Konsortium PAE Sepakat Sdn Bhd (KPSSB), which owns a facility management concession for student hostel facilities in seven polytechnic campuses.

It has inked two conditional share sale agreements for the purchase. The first is to buy Serata Ehsan Sdn Bhd (SESB) for RM80 million from Chong Ngu Chong and Lim Eng Keong, while the second is to buy Seri Delima Anggun Sdn Bhd (SDASB) from Zulkifli Abdul for RM105 million. SESB holds a 44.4% stake in KPSSB, while SDASB holds the remaining 55.6%.

The acquisition is to enhance Gagasan Nadi's concession and facility management operations, while further strengthening its student hostel asset management, according to a statement Tuesday from the company.

KPSSB generated a profit after tax (PAT) of RM14.1 million on revenue of RM13.6 million for the financial year ended Dec 31, 2023. As at end-December last year, the group’s shareholders’ equity amounted to RM228.7 million.

According to Gagasan Nadi, KPSSB had in 2013 secured concession agreements to develop and maintain student hostels at campuses in Banting, Ipoh, Port Dickson, Johor Bahru, Seberang Prai, Jeli and Kota Bahru until 2036. Each polytechnic campus is supported by a special purpose vehicle fully owned by KPSSB.

The acquisition — which will be funded by internally generated funds, sukuk or bank borrowings — is value-accretive for the group, given that the purchase price represents a 19.1% discount relative to the book value, said Gagasan Nadi Cergas managing director Datuk Wan Azman Wan Kamal. In addition, he said the PAT of RM14.1 million will generate an annual yield of about 7%.

“Our concession and facility management operations remain a key strength for Gagasan Nadi Cergas, delivering a steady, stable stream of recurring income. With the proposed acquisition, we aim to solidify our position in the sector, not only by increasing our portfolio of student hostels under management from two to nine, but also enhance our profitability through shared services and benefits from economies of scale,” Wan Azman added.

Gagasan Nadi currently operates facility management concessions for student accommodation facilities at the International Islamic University Malaysia (IIUM) in Kuantan and the Universiti Teknikal Malaysia Melaka (UTeM) in Melaka. The group also has a mandate to provide hostel maintenance and management services for IIUM and UTeM until 2034 and 2037, respectively.

The acquisitions, which are expected to be completed by third quarter of 2025, are subject to approvals from the Public Private Partnership Unit of the Prime Minister’s Department and Gagasan Nadi Cergas’ shareholders at an extraordinary general meeting to be convened. Maybank Investment Bank is the principal adviser of the proposed acquisition.

Shares of Gagasan Nadi Cergas, which have fallen over 5% year-to-date, closed unchanged at 27.5 sen on Tuesday, giving it a market capitalisation of RM207.1 million.

Looking to buy a home? Sign up for EdgeProp START and get exclusive rewards and vouchers for ANY home purchase in Malaysia (primary or subsale)!