By MARK RAO
PRG Holdings Bhd is seeking collaborations to enter the affordable housing market and targets to develop as much as RM5 billion gross development value (GDV) of such properties to strengthen its property and construction businesses.
PRG, which is engaged in the property, construction and manufacturing sectors, signed a memorandum of understanding (MoU) with SPNB Aspirasi Sdn Bhd (SASB) and Mimbar Nusantara Holdings Sdn Bhd (MNH) yesterday to set up residential development joint ventures (JV) in the country.
“Both PRG’s property development and construction divisions will be major profit contributors for the group from next year onwards,” PRG CFO Loi Kok Mun told members of the media at a press conference in Kuala Lumpur yesterday.
SASB is a wholly owned company of Syarikat Perumahan Negara Bhd (SPNB), an agency under the Ministry of Finance Inc responsible for the provision of quality and affordable homes for families in the country, while MNH is a housing developer and project manager.
Loi said PRG’s manufacturing activities had been a constant contributor to the group’s earnings. In future, significant growth in terms of profit would come from the property and construction businesses.
He said PRG’s earnings for the financial year ending Dec 31, 2017 (FY17), would be skewed towards the manufacturing sector, while the property and construction divisions would be significant contributors from FY18 onwards.
For the first-quarter of 2017 (1Q17), the manufacturing division contributed 83.5% of the total RM34.37 million revenue recorded by the group, he added.
The group previously listed as Furniweb Industrial Products Bhd is also on track to list its manufacturing arm on the Hong Kong Stock Exchange (HKSE) by the end of this year, after submitting its prospectus earlier last month.
PRG saw its net profit drop substantially by 43.3% year-on-year to RM891,000 in 1Q17, with the property division falling in the red, recording a pretax loss of RM1 million from a profit of RM2.3 million in 1Q16.
Loi said the drop in profit was due to the increased marketing and sales expenses incurred by the group for its Picasso Residence development project.
PRG group MD Datuk Lua Choon Hann said the luxury residences will begin to contribute positively to the group’s balance sheet in the coming quarters, while the MoU with SASB and MNH will bring in long-term value. “Affordable housing will be our main focus and we are moving closer to making this happen (with the MoU signing),” Lua said at the same event.
PRG is currently studying the viability of several housing projects across Malaysia and has conducted due diligence and feasibility studies on the projects.
He said further details would be announced upon the completion of an official agreement.
“The group will enter into a JV for each project, while MNH will act as the project coordinator and consultant,” Lua added.
MNH MD Nazrin Cheong Abdullah said the affordable housing segment in the country requires more private sector involvement.
“Malaysia needs PRG and other private companies to come in to support and contribute more to affordable homes,” Nazrin said.
“In the market, there are so many affordable projects, but we have to see more smart partnerships between the government and private sector.”
It was recently reported that 21,672 homes will be put on sale under the 1Malaysia People’s Housing (PR1MA) scheme this year, with an estimated GDV of RM2.3 billion.
As of May this year, PR1MA had approved the construction of 265,033 housing units, with 139,419 homes presently under construction.
Meanwhile, PRG is also on the lookout for countries outside Malaysia to expand its property and construction businesses, including Vietnam, the Philippines and Indonesia.
Meanwhile, Rakuten Trade Sdn Bhd placed a ‘Buy’ call on PRG at a target price of RM1.40 per share and forecast a 14 times price earnings ratio for FY18.
The research house said the group’s proposed listing of its manufacturing arm on the HKSE was a key catalyst behind the rerating
“Their property venture is set to boost earnings for FY17 and FY18, coupled with the proposed listing of its manufacturing arm on HKSE,” it said in its report yesterday.
PRG closed at RM1.09 yesterday, up by four sen, and with 1.45 million shares exchanging hands.