PETALING JAYA: Research houses are positive on Scientex Bhd’s proposed acquisition of 1,094 acres of agricultural land in Muar, Johor, for RM200 million to develop a mixed property project.

The plastic products manufacturer cum property developer announced yesterday its wholly-owned subsidiary, Scientex Heights Sdn Bhd, entered into a conditional sale and purchase agreement with Singapore-based Guan Hong Plantation Pte Ltd for the 24 parcels of freehold agricultural land at a value of RM200 million.

The deal is expected to be completed by the second half of 2024. Scientex said the proposed acquisition allows it to increase the group’s existing landbank at a reasonable cost.

“This landbank expansion is also in line with Scientex’s goal to build more affordable homes to meet the objective of completing 50,000 affordable homes throughout the nation by 2028,” it said in a bourse filing.

In a note today, TA Securities said it is cautiously optimistic about the long-term prospects of Scientex building its twelfth township in Johor, considering Muar is one of the proposed stations of the Kuala Lumpur-Singapore high-speed rail (HSR) project.

The research house said no gross development value (GDV) guidance was provided by the management as the land acquisition is still in the preliminary stage.

Nevertheless, it estimated the potential GDV for the Muar lands is likely to be lower than the group’s Senai project (equivalent to RM8.4 million/acre), Kota Tinggi project (RM3.1 million/acre) and Durian Tunggal (Melaka) project (RM2.9 million/acre) due to its distance from the Johor Bahru city centre and Malacca town.

Despite being mildly positive on the land deal, TA Securities maintained its “sell” call for Scientex but revised its target price higher to RM4.07 from RM3.89.

‘A good deal’

Meanwhile, Kenanga Research described Scientex’s Muar land acquisition as a “good deal”, as the land’s price per square foot (psf) was lower than the asking prices of agricultural land in the same area, at around the RM9.20 psf mark.

However, it noted the discount might be due to the land having a more undulating terrain, potentially requiring extra work like cut and fill, and may have lower land efficiency due to restrictions on how the land can be used.

“This will be Scientex’s first foray into the northern part of the state. We are positive as it will strengthen its presence in the Johor property market, leveraging on its successes in other parts of the state,” it said in a research note today.

The acquisition will be financed through internally generated funds and bank borrowings. “Based on our estimate of RM100 million in borrowings, this is expected to increase its net debt and gearing of RM507 million and 0.14x as at end-October 2023 to RM607 million and 0.17x,” it added.

Kenanga maintained its earnings forecasts and kept its “market perform” rating but trimmed its target price (TP) to RM3.63 from RM3.75.

It attributed this to the recent cancellation of a land acquisition deal in Tebrau, Johor, which outweighed the positive impact of the increased revalued net asset value (RNAV) resulting from the latest land deal.

It was referring to the collapse of a deal between Scientex and SP Setia Bhd last month for the former to buy 960 acres of land in Tebrau for RM548 million.

This was the second time the transaction had fallen through as the two companies initially struck a deal for the land at RM518 million in 2021. However, the deal collapsed in March 2023 due to Scientex’s inability to secure a waiver for the Bumiputera equity condition mandated by the federal government’s Economic Planning Unit (EPU).

However, Scientex’s filing did not indicate if the latest land deal needed approval from the EPU.

At 4.40pm, Scientex’s shares were up two sen or 0.5% at RM3.91, valuing the group at RM6.1 billion.