Hunza to uphold good governance after privatisation

GEORGE TOWN (Nov 19): Hunza Properties Bhd, which is being taken private by its majority shareholder Khor Teng Tong Holdings Sdn Bhd, along with persons acting in concert with a combined 59% stake in the Penang-based property developer, said it will be business as usual as a private company, adding that it will not neglect the element of corporate governance.

“It will still be business as usual for us as a private company, and we will not neglect the element of corporate governance; we will still practise good corporate governance as a private entity,” Hunza group founder and adviser Datuk Seri Khor Teng Tong told The Edge Financial Daily after the group’s extraordinary general meeting (EGM) yesterday.

On what prompted the privatisation move, Khor said tough domestic market conditions and increased competitiveness, especially in the Penang property sector, were the main drivers.

The group will now be focusing in the next three years on its property development projects in Penang.

They include Alila II, a high-rise green building project comprising two blocks of 33- or 34-storey residential towers housing 270 units in Tanjung Bungah, and Phases 2 and 3 of Casa Innova double-storey terraced houses in Bandar Putra Bertam. These projects have a total gross development value of RM717 million.

Hunza will also be building 690 units of low-cost flats in Teluk Kumbar, which are expected to be completed by the first quarter of 2016.

It had recently acquired a 3.924ha piece of freehold land in Bayan Baru for RM57.02 million, on which it intends to build affordable homes.

Earlier in the EGM, Hunza’s shareholders approved the group’s proposed selective capital reduction (SCR) and repayment exercise, which will pave the way for Hunza’s privatisation.

During the meeting, 95.47% of Hunza shareholders approved the offer price for the SCR exercise, which was revised to RM2.90 per share from RM2.50 previously.

Following the approval of the SCR, the entitled shareholders will receive a capital repayment amounting to RM267.64 million or RM2.90 per share.

“I am happy with the outcome of the EGM today (yesterday); I believe RM2.90 is a fair offer price that reflects the valuation of our company better. Our team of corporate advisers will now be working towards the delisting exercise, which is expected to be completed by the first quarter of 2016,” said Khor.

It is worth noting that Hunza shares have never traded at or above the SCR price of RM2.90 in the past five years. The SCR price is also a 2.5% premium to Hunza’s current share price of RM2.83, but is a 17.4% discount to its net asset value of RM3.51 per share as at Sept 30, 2015.

Hunza’s other substantial shareholders are Lembaga Tabung Haji, which owns 8.52%, and Yayasan Bumiputra Pulau Pinang Bhd (6.45%).

For the first financial quarter ended Sept 30, 2015 (1QFY16), Hunza reported a 41.8% decrease in net profit to RM4.44 million from RM7.63 million a year ago, mainly due to the absence of new property launches in the quarter, as well as higher operating expenses such as legal fees and loan drawdown expenses.

Revenue for 1QFY16 slipped 40% to RM31.8 million. Hunza shares closed up one sen or 0.35% at RM2.83 yesterday, with a market capitalisation of RM636.99 million.

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This article first appeared in The Edge Financial Daily, on Nov 19, 2015. Subscribe to The Edge Financial Daily here.