Magna Prima should be in a good shape after asset sale

 By NST Property/Kathy B. - August 8, 2023 

KUALA LUMPUR: Magna Prima Bhd has been looking to sell some of its "prime assets" since before the pandemic in a continuing effort to reduce its gearing so that it could continue to operate its business smoothly in the challenging economic environment.

  The company sold its four-storey shopping centre at Boulevard Business Park on Jalan Kuching in Kuala Lumpur to a third party for RM56 million more than a year ago in an arm's-length deal. 

  It might sell more assets to grow its net cash flow and improve its bottom line if the price is right, according to sources with knowledge of the situation.

  "We know Magna Prima is considering possible new business opportunities. The company might seek to sell some of its assets to pay for the new ventures, or they could raise fresh funds for growth," the source told NST Property.

  Magna Prima engages in trading as well as real estate development, construction, and engineering. 

  It has a number of important land holdings in the Klang Valley that it might also develop through a partnership, according to the source.

  These include the 1.06 ha of former SJK (C) Lai Meng land in Jalan Ampang, held by its wholly-owned subsidiary, Twinicon (M) Sdn Bhd, and a 20-acre parcel in Seksyen 15, Bandar Shah Alam, Selangor, held by its 70-per cent owned subsidiary, Magna Ecocity Sdn Bhd.

  Another subsidiary, Magna City Shah Alam Sdn Bhd, owns 5.25 acres at Sultan Abdul Aziz Shah Golf and Country Club, while 33 Sentral Park Sdn Bhd has 6.9 acres near Section 5 in Petaling Jaya.

  Last Friday, Magna Prima announced that it was selling its 100 per cent stake in 33 Sentral Park to Glomics Holding Sdn Bhd for RM65 million.

  In a filing with Bursa Malaysia, the company said the proposed disposal is expected to be completed in five months from the date of the agreement.

  "It will enable Magna Prima to exit a business area that is not considered strategic and synergistic to its other operations in the group and, at the same time, to focus on the group's core businesses," it said.

  Magna Prima said the proceeds from the sale will be used to fund existing businesses and future expansions.

  However, it said the sale is expected to result in a loss on disposal of RM3.73 million for the financial year ending December 31, 2023, after taking into consideration the negative net current liabilities of RM68.695 million based on the audited financial statements of 33 Sentral Park as of December 31, 2022.

  According to the filing, 33 Sentral Park recorded no revenue for the fiscal year 2022, but its accumulated losses were about RM3.6 million.

  33 Sentral Park owned two pieces of adjoining freehold land measuring a total of 6.9 acres along Jalan Gasing in Petaling Jaya.

  The land is currently charged to OSK Capital Sdn Bhd as collateral for a loan granted to Crossborder Team (M) Sdn Bhd. The outstanding loan payable to the lender is not more than RM15 million, according to the filing.

  Magna Prima believes that the proposed disposal is reasonable and in the best interest of the company and its shareholders. 

  It will also not assume any additional liabilities under the proposed disposal.

  Magna Prima recorded no revenue for the three months ended March 31, 2023 (Q1 2023), but there was an increase in net loss of RM4.09 million for the period, largely contributed by the property development segment.

  In a May filing with Bursa Malaysia, the company outlined its prospects for the fiscal year 2023.

  It said that on September 7, 2022, it had awarded a turnkey construction contract to Tafi Home and Office Sdn Bhd, a subsidiary of Tafi Industried Berhad, to develop a project on one acre of land in Metro Prima, Kepong, with a gross development value of RM130 million.

  The project is a joint venture with Dewan Bandaraya Kuala Lumpur (DBKL) and consists of 266 service apartments. 

 According to Magna Prima, DBKL has approved the developer order and building plans with an increased density of 306 units. 

  The Supplemental Agreement between Magna Prima and DBKL is now being finalised, and the project is expected to be launched by September of this year, according to the company's Annual Report and CG Report 2022.

  Additionally, the company disclosed that Magna City Shah Alam had signed a Joint Venture Agreement (JVA) to build The View Residence at Kelab Golf Sultan Abdul Aziz Shah, which will have three blocks of 15-storey residences and five units of retail space.

  The View is expected to be launched before the end of the third quarter of 2023.