Quarry operator Minetech Resources Bhd intends to expand its property development segment in order to increase the group's future revenue and earnings.
The group is acquiring a plot of freehold land in the prime area of Ampang, Kuala Lumpur, for RM60 million in cash through its property arm, MRB Property Sdn Bhd, to develop a commercial project.
Minetech stated in a stock exchange filing last week that it intends to leverage the successful development of the land to embark on additional viable property development ventures in the future.
The group is leveraging its existing expertise to expand further into the business because its construction arm complements its development ambition and costs can be reduced by engaging in-house contractors and engineers to complete the construction work.
According to the group, the success of the Ampang project will serve as a litmus test for the group's future endeavours.
Minetech is primarily involved in the production of quarry and bituminous products, civil engineering works, renewable energy and oil and gas industry activities, and property development.
The property development segment currently owns about 231,790 square metres of land, the majority of which is located in Perak. This includes a plot of undeveloped residential development land in Taman Bercham Jaya, Ipoh.
It also owns three parcels of vacant industrial land in Tanjung Malim's Kota Malim Prima, where notable industrial zones nearby include Proton City Industrial Park and Behrang 2020 Industrial Park.
"The Board opines the proposed acquisition will augur well for Minetech. The future development of the land is expected to contribute positively to the group's future earnings and possibly, create a credential for the group in the property development and construction industries," it said.
Minetech's property development segment has been relatively dormant for the past five fiscal years, up to the fiscal year ended March 31, 2021. In the fiscal year ended March 31, 2019, the segment generated about RM2.15 million in revenue.
Minetech said that the proposed acquisition is part of the group's expansion plan to increase its land banks in strategic locations with growth potential and to scale up its property development portfolio in order to generate an additional stream of income for the group in the future.
M & GA Sdn Bhd owns the land, which currently houses eight units of single-story commercial shops with a net lettable area of 2,919 square metres and is leased for RM1.465 million per year.
According to the filing, the market value as of November 11, 2021 is RM60.4 million.
Minetech stated that the Board is currently deliberating on the land's development plan.
It stated that the Board intends to carry out a commercial development on the land following the completion of the proposed acquisition.
Notwithstanding the foregoing, Minetech said that the Board is still unable to confirm the details of the said development at this time, which include, among other things, the timeframe for completion, the development costs, and the eventual funding requirements, as such plan is still in the preliminary stage.
MRB, according to the group, is conducting feasibility studies to assess the risk-reward profile before deciding on the best development plan for the land.
The land measures around 5,612 square meters and is situated along Jalan Mengkudu and Jalan 1/67B within the affluent residential area of Desa Pahlawan, off Jalan Ampang.
Surrounding residential properties in its immediate vicinity include Ampang Hilir, Ampang 971, Taman U Thant, and M-City, while prominent landmarks situated nearby are Great Eastern Mall, International School Kuala Lumpur, Gleneagles Hospital Kuala Lumpur, and Taman Tasik Ampang Hilir.