Compugates optimistic on property business

PETALING JAYA: Compugates Holdings Bhd, whose proposed diversification into property investment holding was approved last Friday, expects the new business to contribute as much as 80% to its revenue and profit by 2018.
Managing director Goh Kheng Peow said its core business, consumer electronics distribution, will eventually wind down to 20% while property will contribute 80% when sales from its first project kick in, either in 2017 or 2018.
“They have submitted the road planning application in January already, so we are waiting for that. Then, we will submit the building plan. We hope to do it in the next few months. Once approved and we get the development order, we can start. We target to launch in the second half of 2017,” he told reporters after its EGM last Friday.
The project is a joint venture (JV) between Compugates’ 70%-owned sub-subsidiary Compugates Development and Mining Sdn Bhd (CDMSB) and Main Uptown Sdn Bhd for a seven-phase mixed commercial development on 38 acres of land, over 10 years. It has a gross development value (GDV) of between RM1 billion and RM1.5 billion.
The proposed JV and the proposed diversification were approved by shareholders at the EGM, along with the proposed par value reduction and proposed amendments.
CDMSB is entitled to 22% of the GDV, which is at least RM220 million based on the RM1 billion GDV. For the first phase of the project, it is entitled to RM10 million.
“If the market is good, they can do the GDV up to RM1.5 billion, then it will be RM330 million. The 22% goes straight to our bottom line because our land is not encumbered to the bank,” said Goh.
“Over the last one year, the property market has been soft but anything that goes down will come up again. We aim to start selling in 2017 or 2018; the market would have improved by then.” he said.
Meanwhile, Goh said the withdrawal of its facilities from Public Bank and Maybank, which wil be reflected in its third quarter results, will make it a zero-gearing company. Its par value reduction will offset its accumulated losses.
For its renewable energy business, the group has completed 17 projects worth over RM5 million and is waiting for more projects from the government, having submitted proposals worth over RM6 billion.
The group, which was in the red from 2012 till 2014, returned to the black last year and Goh said it hopes to remain profitable and declare dividends soon.
“When we started our dividend policy it was supposed to be 50% of the profit that the company makes. Unfortunately through the years, because we have invested all our money into buying land, planting gaharu trees in the land which we have also bought, we have not been able to unlock the value yet. Once we unlock the value we will declare dividends,” he added.