The rm will dispose of the land, only if the price is right, says MD

by MARK RAO / pic by ISMAIL CHE RUS

SEACERA Group Bhd might sell some of its 501 acres (202.7ha) of undeveloped landbank in Semenyih to strengthen its cash position after struggling with years of losses and weakened profitability.

Group MD Zulkarnin Ariffin (picture) said the company would, however, dispose of a portion of the undeveloped land, only if the price is right.

“I think cash is always the best asset to hold and, with cash in hand, you have more flexibility to do investments, expansion and business acquisitions,” he told The Malaysian Reserve in a recent interview.

The sizeable freehold and unencumbered land located in Lot 613 of Mukim Ulu Semenyih, Selangor, is Seacera’s largest property asset and carried a net book value of RM784.45 million as at March 15, 2017.

The land was supposed to be developed into a property project worth some RM10 billion in gross development value.

However, the project was deferred as the company could not secure the proper deal with a prominent property developer.

Seacera gained access to the 501-acre landbank when it completed the acquisition of a 250.24-acre portion of the land for RM165.1 million back in August 2017.

Six months after the acquisition, the company then planned to bring in a partner to jointly develop the land before announcing the development plan, but it did not materialise as the two parties failed to reach agreeable terms.

“There were some parties interested (previously), but of course, certain terms eventually were not agreeable. This is normal in negotiations,” Zulkarnin said.

While soft property market conditions also dissuaded developers from investing in the project, Zulkarnin said the timing is right to begin project planning.

“We think it is good timing for them to do the planning and, when the industry improves, we can start launching the products,” he said.

He said several parties are currently interested in developing the Semenyih land alongside Seacera, with some already putting forward their proposals. However, he said it is subject to further evaluation and negotiations.

Disposing of some of its property assets is part of Seacera’s larger streamlining efforts which saw the company divesting a 60% stake in construction vehicle Spaz Sdn Bhd for RM12 million cash.

This leaves Seacera with a 20% interest in the loss-making company. Nevertheless, Zulkarnin said Seacera could re-enter the construction market once it recovers.

“I think if the market can recover, there is a possibility that we will re-enter the construction business, (but) maybe we can go on a smaller-scale basis to support our business,” Zulkarnin said.

He said Seacera initially ventured into construction to complement its existing tile manufacturing and distribution business, but challenging operating conditions had caused the company to rethink this strategy.

“We think for the time being, we should dispose of the company (Spaz) and then, we may be able to re-evaluate in the future,” he added.

Going into the current fiscal year, Seacera is now left with its maiden tiles business when it was first incorporated as Seacera Tiles Sdn Bhd back in August 1987 as its sole revenue contributor.

For the year ended Dec 31, 2018 (FY18), the company reported a RM41.13 million net loss due to cost overrun and revenue falling short of overhead costs for the construction business.

Impairments recognised for the tiles business also weighed on earnings that year.

This was against the RM8.92 million net profit registered the year before, while revenue in FY18 also declined 42.4% year-on-year to RM23.3 million. Turnover from the tiles business made up 82.4% of total group revenue that year.