KUALA LUMPUR (May 16): YNH Property Bhd is disposing of a piece of freehold land measuring 5.098 acres (2.06 hectares) in Desa Seri Hartamas to the Sunway group for RM170 million cash. 

YNH will receive an additional RM50 million cash from the Sunway group should it manage to obtain a new development order (DO) from the authorities for a project with a minimum plot ratio of seven on its net land area (NLA) within one year from the date of the signing of the sales and purchase agreement (SPA). The land has an existing DO for a minimum plot ratio of five on the NLA.

The sale will still stand if YNH fails to get the new DO, according to the group's filing with the stock exchange.

"The additional RM50 million acts as an incentive for our group to obtain a new DO for the purchasers. We agreed with this additional clause because we are confident we will be able to obtain the new DO leveraging on our track record and expertise in this area as well as the strategic location of the land bank. Naturally, with a new DO, the value of this land bank will increase,” said YNH general manager James Ngio in a separate statement.

The RM50 million will be placed with the lawyers of the purchasing parties as stakeholders, YNH said, and will be disbursed to YNH upon fulfilling the additional consideration clause.

YNH's wholly owned Kar Sin Bhd last Friday (May 12) entered into an SPA with Sunway Living Space Sdn Bhd, a unit of Sunway City Sdn Bhd, for the divestment. Sunway City is a wholly owned subsidiary of Sunway Bhd.

“We are excited to add this prime land to our portfolio, and to continue our commitment to creating vibrant integrated communities. This acquisition comes ready with an approved DO with a plot ratio of five, and we target to launch this development by early 2025,” said Sarena Cheah, the managing director of Sunway's property arm, Sunway Property, in a press statement.

“This underscores our confidence in the Malaysian property market, and we are confident that this development will be highly desirable among our multiple customer segments.”

Accessibility to the development includes the Sprint Penchala Link and Kerinchi Link as well as nearby amenities in Seri Hartamas and Mont Kiara, such as shopping malls, international schools and medical facilities.

Sunway Property currently has a total land bank of 3,063 acres, with a potential gross development value (GDV) of RM48.9 billion over a period of more than 15 years.

The latest land sale is YNH's third asset disposal over the last 12 months, after it sold two retail malls — the 163 Retail Park in Mont Kiara and AEON Mall Seri Majung in Perak — to ALX Asset Bhd in March this year for RM423 million cash.

At the time, YNH said the disposals were to provide it more leeway to secure future funding to finance other projects, as well as for the launch of its flagship Menara YNH project, which carries an estimated GDV of RM3 billion.

The Menara YNH project has been delayed several times since 2006, with the termination of deals with two prospective buyers in the past, namely Singapore's property giant CapitaLand Ltd and Kuwait Finance House.

Proceeds from the latest disposal, meanwhile, will be used for working capital and to pare down its bank borrowings to RM733 million from RM951.81 million at end-December 2022, which will reduce its gearing from 0.65 times to 0.59 times, and give rise to interest savings of RM3.77 million per annum. The group's cash and bank balances stood at RM48.67 million, as opposed to RM34.15 million at end-December 2021.

The disposal, which is estimated to be completed in three months, will also result in an estimated gain of RM2.6 million, after taking into consideration the disposal's estimated expenses of RM800,000.

YNH executive chairman Datuk Dr Yu Kuan Chon is the group’s single largest shareholder with a 32.6% stake, 24.4% directly owned and 8.2% indirectly owned. His brother Datuk Yu Kuan Huat, who is YNH's managing director, holds 29.4% — 4.5% directly held and 24.9% indirectly held.

For the financial year ended Dec 31, 2022, YNH's net loss widened to RM14.59 million from RM2.79 million a year earlier, as revenue fell to RM210.75 million from RM231.28 million.

YNH’s share price has climbed over 47% over the past 12 months. The stock hit a record high of RM5.20 on May 5. At the close on Tuesday, it settled at RM4.90, up eight sen, with 69,900 shares done and a market value of RM2.59 billion.

Sunway, on the other hand, closed one sen higher at RM1.56, giving it a market capitalisation of RM7.8 billion.