KUALA LUMPUR (June 29): Boon Koon Group Bhd, which specialises in rebuilt commercial vehicles, intends to diversify into property development.

To do that, Boon Koon will jointly develop a residential project with Platinum Eminent Sdn Bhd, a wholly-owned subsidiary of Aera Property Group Sdn Bhd, in which its controlling shareholder Datuk Seri Chiau Beng Teik is also the stakeholder.

In its filing with Bursa Malaysia this evening, Boon Koon announced that it had entered into a joint development agreement with Platinum Eminent.

Under the agreement, Boon Koon’s wholly-owned subsidiary BKG Development Sdn Bhd will have to pay an upfront participation fee of RM20 million, which in turn will entitle Boon Koon to 60% of the gross development profits of the project, which is estimated to be RM93.5 million.

The development project, which is known as Aera Service Residence, has an estimated gross development value (GDV) of RM306.1 million and consists of two blocks of 29-storey buildings housing 752 units of serviced apartments located in Petaling Jaya in Selangor.

“The expansion of Boon Koon group’s business into property development is part of the company’s strategy of diversifying into other industries with strong growth prospects instead of depending solely on its existing core manufacturing business,” it said.

“The board expects the property development business segment, under the proposed joint development, to contribute up to 25% of the net profits and/or net assets of the group,” it added.

The group also proposed a special issue of up to 55.35 million new shares, representing 20% of its existing share capital and is expecting to raise up to RM22.1 million at an indicative issue price of 40 sen per share.

It said that the proceeds from the special issue will be used for the investment of future projects relating to property development.