New shareholder to emerge in Magna Prima

THE EDGE WEEKLY ISSUE#989

THE WEEK OF NOVEMBER 18 – NOVEMBER 24, 2013-12-07

By Siow Chen Ming

Magna Prima Bhd, the company with the mandate to develop a prime piece of land that is just a stone’s throw from the Petronas Twin Towers, is poised to see a change in shareholding.

Sources say a new party with links to large construction companies from China is tipped to helm the company as the existing major shareholders – Fantistic Realty Sdn. Bhd, which holds 25.12% stake, and Muafakat Kekal Sdn. Bhd (9.91%) – are divesting their interests. 

The shareholding change comes as Magna Prima is expected to obtain within the next few weeks the DO (development order) for the 2.6-acre site in Jalan Ampang that is now occupied by Lai Meng School to kick-start a project worth RM1.8 billion.

It is not known whether a shareholding change will result in takeover of Magna Prima or cause any drastic transformation.

But the new shareholder is expected to play a bigger role in the management of the company as it undertakes the massive job of redeveloping the Lai Meng School land.

Under the current set-up, Magna Prima is run professionally with its key shareholders giving the company’s board and management full rein.

Individuals whose names previously surfaced in Muafakat Kekal include Datuk Abdul Hanif Abdullah and Lee Yek Hui while Lee Hing Lee controls Fantastic Realty.

None of them sits on the board of Magna Prima.  At the same time, no Magna Prima directors is linked to Muafakat Kekal and Fantastic Realty.

Industry executives say the Lees started out in property development by undertaking small projects around Kuala Lumpur and Selangor. 

For instance, Muafakat Kekal was the developer of the Palm Spring Damansara Condominium in Kota Damansara, which was completed in 2005.

The Lai Meng School land, on which a mixed-use development
comprising a retail podium and two 60-storey towers is planned,
could produce a GDV of RM1.8 billion.

It is learnt that the current batch of substantial shareholders had got into Magna Prima before the latest property boom and now feel it is time to cash out because the large developments that the company is set to undertake require much time and resources.

As t last Thursday, Magna Prima’s stock had risen from 50 sen five years ago to RM1.29, putting its market capitalisation at about RM433 million.

The counter has climbed sharply this month alone, from RM1.04 on Nov 1 to a peak of RM1.36 on Nov 11 before giving back some gains.

Recent interest in the stock could have been driven by positive developments in the Lai Meng School project.

According to industry players, the DO for the project could come approved with a plot ratio of between 10 to 13 times, which would allow Magna Prima to carry out a high-density mixed-use development on the land with a high GDV (Gross Development Value).

Magna Prima’s management has told The Edge in February that the Lai Meng School land could produce a GDV of RM1.8 billion and that the development would comprise a retail podium and two 60-storey towers – one for serviced apartment and the other for a hotel and office lots.

The company also said that it expected to take possession of the Lai Meng School by the end of the year and commence development work in the 2^nd Q of 2014.

The school is moving to Bukit Jalil and will start anew next year.

The deal, which was entered into in 2010 between Magna Prima and the Lai Meng Girl’s School Association (LMGSA) – the custodian of the land in Jalan Ampang – was conditional upon the former transferring a 5.5-acre parcel in Bukit Jalil with new school facilities to the latter at no cost on top of paying RM148.1 million cash to the association.

Magna Prima is said to have acquired the site in Bukit Jalil from Santari Sdn. Bhd for RM10.7 million and spent RM30 million to RM50 million on constructing the new school.

Including the RM148.1 million cash payment to LMGSA, Magna Prima’s total cost for obtaining the Lai Meng School land comes to about RM209 million or RM1,845 psf.

When the deal was signed in 2010, industry observers said the pricing for the land was fair.

In 2009, Tropicana Corp Bhd had acquired the nearby 55,929 sf Bok House for RM123 million or RM2,200 psf.  The Bok House site is being developed into a 50-storey tower, comprising a hotel and high-end residences carrying the W Hotel brand.

Magna Prima had said earlier this year that the market value of the Lai Meng School land then was RM300 million.

The value of the land, together with the DO, will determine the entry price for the new shareholders of Magna Prima, who then have to carry out the project that will put the company in a different league.