Monday, March 14, 2011

GEFUND ... Mar11

It is making its foray into Indonesia and is planning to undertake a mixed development property project in east of Jakarta. It had signed an MoU with PT Greenworld Development to undertake the project totaling 50.74 acres east of Jakarta.

The proposed involvement in property development was in line with the group’s strategy to diversify its revenue stream.

The site was along Jalan Pengangsaan Dua, Rawa Terate Village and surrounded by established neighbourhoods in the Kelapa Gading sub-district which is mainly a middle to upper middle class area. Kelapa Gading had six shopping malls within a 20-km radius and it was 14km from central Jakarta.

Incorporated as a private limited company in Indonesia, Greenworld has a registered capital of US$2 million (RM6.08 million) and is principally involved in property development and investment.

In September 2009, businessman Datuk Allan Lim Kim Huat was appointed Gefung’s managing director after he bought a 25.19% stake in the group via an off-market transaction from its former managing director and major shareholder Seo Aik Leong.

Lim is also the executive deputy chairman and a substantial shareholder of Sunrise Bhd, which has since been acquired by UEM Land Holdings Bhd.

Lim acquired the 39 million shares in Gefung from Seo at 50 sen each, or RM19.5 million. Seo still has a 3.09% stake, or 4.78 million shares, in Gefung.

The group is one of the top 10 marble and granite importers in China and one of the top three in Shanghai. Its Shanghai plant, located in Chonggu Town, has the capacity to process 900,000 sq m of marble products a year.

Some of its prominent customers include the Shangri-La Hotels Group and Hong-Kong based developers Sun Hung Kai Group and Wharf Group.

For FY10 ended Dec 31, Gefung’s net loss ballooned to RM56.9 million from RM17.8 million a year ago, despite a higher revenue of RM55.6 million versus RM42.5 million previously.  Losses per share amounted to 36.77 sen compared with 11.55 sen the year before.

Gefung will be in a net cash position upon the completion of a rights issue, which is expected to raise rm29 million to finance new business ventures, including property development.
Based on the proceeds of rm29 million and Gefung’s cash of rm7.44 million as at Dec 31, 2010, the company will have a larger cash pile of rm36.47 million against debts of rm28.39 million, comprising rm27.12 million in short term borrowings. This will translates into net cash of rm8.18 million.

Gefung’ announced proposals to rejuvenate its financials, including one to reduce the par value of its shares from rm1 to 20 sen each. The credit of rm123.84 million derived from the reduction will be more than set off against the company’s accumulated losses of rm73.96 million as at Dec 31, 2010, leaving rm49.88 million to be credited to its capital reserve account.

Subsequent to the capital reduction, it intends to carry out a rights issue of up to 193.5 million new shares at 15 sen a piece (another 5 sen will be capitalized from the reserve account) on the basis of five units for four existing shares in the company.

It is estimated that Gefung’s net assets per share will be reduced to 32.8 sen upon completion of the entire exercise, from 53 sen as at Dec 31, 2010.

Based on the indicative issue price of 15 sen apiece, the cash call would raise rm29.03 million for Gefung. Of the amount, rm15 million will be earmarked for new business ventures, while rm10.19 million will be set aside for working capital. The group is also allocating rm3 million to repay its bank loans.

Its new business plans may include acquisition of strategic investments apart from collaborations, JV or alliances.

The proceeds from the proposed rights issue will provide an opportunity for the group to venture into property development, which complements its current marble and granite business, and is expected to provide better growth and enhance its earnings given the current positive outlook for the property market.

Lim, by virtue of being the largest shareholder with a 25.19% stake, will provide an undertaking to fully take the up his direct entitlement of the rights shares, apart from additional units not taken up by other shareholders.

Should he take up the addition units, his stake could increase to 54% and he would seek an exemption from the obligation to make a general offer for the remaining shares in the company.

His entry into Gefung was seen as heralding new era in the loss making marble and granite processor. Armed with a wealth of experience in luxury property development, he is expected to spearhead the creation of real estate related operations as a major income stream for Gefung in the years ahead.

The question is, how soon will Lim revive the fortunes of Gefung, which posted a net loss of rm56.91 million in FY2010 ended Dec 31. The company has no existing landbank to kick start its property development projects. Thus, the acquisition of property companies with attractive landbank and projects could be a viable route.

Such acquisitions may involve an asset injection by either Lim, or a third party who would then emerge as a substantial shareholder of the company.

Lim’s links to Sunrise could be a platform for Gefung to expand its presence in IDR as well.

The market will be watching the makeover of Gefung into property player closely, and how the company rejuvenates its financials under Lim’s leadership.

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