Merger of OSK Holdings, OSK Property and PJ Development

The news has been circulating for some time but today, the shareholders of OSK Holdings Bhd shareholders has approved the purchase of OSK Property Holdings Bhd and PJ Development Holdings Bhd. for up to RM1.71 billion. In essence, OSK Holdings will buy 72.4 percent in OSK Property for RM346.4 million. New shares totalling 177.64million shares would be issued at RM1.95 each. OSK Holdings would also be buying 31.6 percent in PJD for RM223.64 million. this will be completed via the issuance of 114.68 million new OSK Holdings shares, also at RM1.95 per share. The most significant part of this merger is that the three combined companies would have assets totalling more than RM5 billion.
As a developer, OSK Property is considered a big one where profits are concerned. While many of the listed developers are struggling to turn in RM50 million profits per year, OSK Property’s ended Q1 2015 with RM48.3 million net profit. Yes, this is just for Q1 2015. It’s Q1 2015 revenue was RM284 million. This meant the net profit margin for OSK Property is at a healthy 17 percent as at Q1 2015. This is higher than SP Setia’s latest announced results. Read here: First 6 months, SP Setia’s net profit margin at 12.83% Meanwhile PJ Development Holdings Bhd reported a net profit of RM32.59mil for its second quarter ended Dec 2014 versus a revenue of RM240.40 million. This gave it a net profit margin of 13.6% The one thing PJ Development is ahead is its overseas venture. It has already announced a potential development in Melbourne with a Gross Development Value of between RM8 – RM9 billion.
I personally believe that more of these mergers would continue to happen. The reason is simple, size matters. The merged entity is able to be better placed when compete against the bigger developers which are coming into Malaysia in a big way. Smaller players would be able to continue offering niche and smaller projects but these big players would have the strength to build huge new developments in new areas. I rate this as good as it meant that we do not need to concentrate on just that few hotspots all the time. Wishing this new merged entity the best.
written on 6 July 2015
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