PR1MA buys Glomac land for RM145.59 million (16.9 ha)

For developers, it’s not the best time to be holding lands and not doing anything. Current negative sentiment is persisting despite earlier predictions about a better H2 2015. Ringgit has gone up slightly but is still very volatile as the expectations of the decision from Federal Reserve overrides whatever story we may have over here. One listed developer is unlocking the value of its land and get some funds for future plans. Glomac Bhd will have a net gain of RM83.6 million after selling its 16.9 ha freehold land in Cheras to Perbadanan PR1MA Malaysia for RM145.59 million.
This piece of land was bought in 2004 and has a net book value of RM35.53 million. Of course, when they sell, it would be revalued based on current market prices and thus the current selling price. In fact, PR1MA had to offer a competitive price based on a willing buyer, willing seller basis. So now we know for sure that even PR1MA has to buy its lands and thus the prices being offered would definitely have to take this into account. In case, we are wondering why the prices they offer could not be much lower. The transaction would be completed on March 31, 2016. With this net gain, GMSB would provide it with future acquisition of more strategic landbank. It will be subject to the approval of the state authority.
The net gain of RM83.6 million is considered a huge gain and selling it is indeed a sound decision. If they were to develop it now, additional funds are needed and the total net profit is going to come 4 years later. Sound decision, really. Anyway, for those who love property stocks, this net gain would translate into 12 cents per share. It’s current share price? 89.5 cents. As for buying or not, it depends on also whether Glomac would have other developments. We should not be buying simply because of a one-time gain from selling of land. Do note that the proceeds would have to be ploughed back into buying landbanks in future. I do not own any Glomac stocks today. Happy investing.
written on 13 Oct 2015
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