Vortex Consolidated Bhd's entry into the property market could have come at a better time, given the current slow economy but with several investment properties in hand, that could set the mood back again for the group.
In the financial year ended 31, December 2018 (FY2018) and in FY2019, Vortex acquired eight properties in Selangor and Johor, including a factory in Shah Alam and shop offices in 3 Two Square, Petaling Jaya.
Vortex has been generating positive income due to rentals received from the properties.
Development-wise, it has new property projects and will launch them when the market recovers, albeit cautiously, said a person with knowledge on the matter.
It is understood, Vortex, formerly known as SKH Consortium Bhd is in an advance stage of planning a mixed residential development, comprising mainly landed properties, in Pahang.
In August 2018, Vortex acquired 80 per cent stake in Kepayang Heights Sdn Bhd, which in turn owns 7.89 hectares of land with a 99-year lease expiring on 10 June 2107 in Bentong.
The land, which has a market value of RM15.5 million (based on valuations in 2018), is sited within a locality known as Kampung Bukit Tinggi, located 30km to the south-west of Bentong town centre, and is surrounded by residential and commercial.
Notable residential settlements in the vicinity includes Kampung Janda Baik, Kampung Cheringin Tengah and Kampung Chemperuh.
Higher revenue for Vortex
Before 2019, Vortex derived most of its revenue from its IT and ICT division. It diversified its business to include property development and property investment over a year ago, to reduce reliance on its existing business in the ICT and construction sectors.
The group had anticipated that the property development and property investment divisions will contribute 25 per cent or more of its net assets or 25 per cent or more of its net profit in FY2019.
Vortex took over The Louvre, a mixed development project in Country Heights, Kajang with a gross development value of RM341.81 million in early 2019. It did this by acquiring loss-making private property firm, Paris Dynasty Land Sdn Bhd, for a nominal cash consideration of RM100.
Paris Dynasty owns the project sprawled over 1.12ha. It comprises 30 units of lifestyle retail shop lots and a 34-storey serviced apartment block with 498 units.
Construction work commenced in March 2015.
It was reported recently that the project, which has an estimated gross development cost of RM285.34 million, is halfway completed.
In the third quarter of FY2019, Vortex achieved higher revenue of RM42.1 million as versus to RM40.63 million which is posted in the same period in FY2018. There was higher revenue mainly due to the increase in revenue in IT and ICT, as well as from its property development and property investment divisions.
The property development division posted an increase in revenue mainly due to the progress billings that arose from the development work achieved for The Louvre. The revenue recognised was also based on the development stage of completion and the percentage of the number of units sold.
Despite higher revenue, the group's net loss rose to RM1.9 million in the period under review, from RM465,000 in the third quarter of 2018. This was mainly because of interest expenses incurred on the term loans.
Better cashflow
In a filing with Bursa on 16 March 2020, Vortex said that its wholly-owned subsidiary, Open Adventure Sdn Bhd has entered into a sales and purchase agreement with Classic Blossom Sdn Bhd (CBSB) to dispose of a two and a half storey semi-detached factory in Shah Alam for RM10.6 million.
CBSB is currently renting the 19-year-old factory for RM27,000 a month and it will continue to pay the rental until the completion of the proposed disposal, said Vortex.
Vortex said the rationale for the proposed disposal of the factory is to provide immediate cash flow for the company which will be channeled towards its business operations.
Vortex is expected to have a gain of about RM1.8 million from the sale, which is 22 per cent return on the investment. The company acquired the freehold property on 8 December 2017 for RM8.12 million.
As of 31 March 2019, the net book value of the property stood at RM8.03 million.