Mercury Industries Bhd will undertake a mix-housing project featuring apartments in Melaka, which is expected to generate a gross development value of about RM152.3 million.
Its wholly-owned property development subsidiary Plutovest Sdn Bhd had on August 16, 2021, entered into a Development Rights Agreement (DRA) with Aturan Prisma Sdn Bhd (APSB) to develop a parcel of freehold land measuring around 1.74 hectares in Pekan Tanjong Kling in Melaka Tengah.
The land is presently registered in the name of Perbadanan PR1MA Malaysia (PR1MA).
Mercury Industries said in a filing with Bursa Malaysia yesterday that APSB will take over as the registered proprietor of the land from PR1MA, after having obtained approval from the relevant authority.
This housing project coupled with the recently secured RM450 million contract to build serviced apartments in Johor holds water for Mercury Industries as it had been trying to secure new jobs amid the ongoing Covid-19 pandemic.
The company told Bursa Malaysia in June that its construction segment had difficulty in replenishing its order book with new construction projects due to the negative impact and uncertainties with the ongoing Covid-19 pandemic and the overhang of unsold completed properties.
It secured the contract for the property project in Johor last month from Solusi Kelana Sdn Bhd to build three 35-storey blocks of serviced apartment and Soho units.
Work is scheduled to start on September 1 and it entails building 2,432 units over 32 months by April 30, 2024, the company said.
It also indicated that the contract (RM450 million) is expected to contribute positively to its consolidated earnings and net assets for the financial year ending December 31, 2021and onwards, during the duration of the contract.
Mercury Industries began its operations in 1975 and its core business was trading in automotive paints and refinish products serving the local automotive industry. In 2015, the company undertook a corporate restructuring exercise to tap into the construction industry, evolving its core business to civil and building construction, trading of building materials, and services industry serving mainly property developers.
In the first quarter ended March 31, 2021, the company's revenue decreased by RM2.82 million or 96.3 per cent to RM109,000 as compared to RM2.93 million achieved in the corresponding quarter in 2020.
Its pre-tax loss increased by RM390,000 or 38.5 per cent to RM1.4 million as compared to a pre-tax loss of RM1.01 million achieved in the corresponding quarter of 2020.
Meanwhile, for the mix-housing project in Melaka Tengah, Mercury Industries will construct one block of service apartments with 648 units, among others.
APSB, which is principally involved in construction and ancillary works, and Plutovest have agreed to collaborate and cooperate to develop the land into a housing development together with all necessary infrastructures, subject to the conditions of the DRA.
Mercury Industries said the proposed DRA will enable it to undertake both the development and construction works for the project.
It will also enable the company to participate in the project without an outright purchase of the land which will otherwise require a significant cash outlay, it said.
It said the estimated total gross development cost is RM105.6 million.
The project is expected to commence in the third quarter of 2021, and it will be developed over an estimated period of five years, using internally generated funds and bank borrowings, it said.
On prospects for the project, the company anticipates there may be demand given its strategic location.
"The magnitude of Covid-19 effects upon the residential market is currently unknown and will largely depend on both the scale and longevity of the outbreak. In general, prices will be under pressure due to the severe economic impact on businesses and individuals although the six-month automatic loan moratorium is expected to provide a short-term breather to borrowers.
"The price correction will depend on various factors that include property type, location, and price range amongst others," it said.
Mercury Industries said it intends to focus on strategically marketing its properties to the right target market segments and introduce attractive sales packages to encourage sales.
The company said it is optimistic that the long-term prospects will be supported by the long-term prospects of the local construction and property markets.