SINGAPORE (July 28): GSH Corp, whose main business thus far is its resort in Sabah and an office building formerly known as Equity Plaza, is investing RMB200 million (S$40.6 million) for a 30% stake in Henan Zhongyuan Group, a specialised food logistics company in China.
The company runs a food logistics and warehousing hub in Zhengzhou, the provincial capital city of Henan province, in central China. It has a total lettable area of 350,000 sqm of cold storage, warehousing and retail space.
Out of the more than 1,000 tenants that are taking up space, more than 100 own stakes in the company, which helps pool them together to fetch preferential pricing via bulk purchases.
These companies together generate some RMB50 billion in trading turnover which is growing at 20% a year.
This investment is a combination of GSH’s executive chairman Sam Goi Seng Hui’s two familiar industries: Food and Property. Upon completion of this deal, GSH Corp will be the largest shareholder in the company. GSH will be funding this investment with internal resources.
Henan Zhongyuan Group is already expanding into other parts of China. It has already secured land in Tianjin and there are plans to develop similar centres in locations like Guangdong, Chengdu, and even as far as Urumqi in the farflung Xinjiang Autonomous Region.
In an interview with The Edge Singapore, Goi is optimistic that this investment will be immediately accretive to GSH’s earnings. Down the road, as the number of logistics centres grow, Goi has plans to spin off some of them into a REIT.
In addition to this investment, Goi is also happy to note that occupancy in its Sutera Harbour Resort has been improving, as tourists from China make a return to Malaysia in bigger numbers.
The company has been selling GSH Plaza, right next to the Raffles Place MRT station. Recognising that the office market isn’t the most bullish now, Goi says GSH will hold off from trying to sell units in this redevelopment, preferring, instead, to lease them out later in the year when works are completed.
For the first quarter to March 31, 2016, the company announced earnings of S$2.8 million, reversing losses of S$363,000 in the year earlier quarter. Revenue was up 64% y-o-y to S$23.5 million.
GSH Corp shares, which have gained 28% year-to-date, was halted for trading pending this announcement.
It closed at 32 cents on Thursday, giving the company a market value of S$632 million.