KUALA LUMPUR (Sept 9): Plastic pipes and fittings maker Resintech Bhd (KL:RESINTC) has secured a joint venture (JV) partner and a tenant for a proposed hostel development in Kuala Langat, Selangor, with an estimated gross development value of RM34.1 million.

The JV partner is construction and engineering firm CNH Group Sdn Bhd, with whom it will jointly develop the mixed development on part of a land measuring some 4.6 acres that Resintech's wholly owned subsidiary Johan Panglima (M) Sdn Bhd bought in 2021 for RM23.54 million, Resintech's bourse filing on Monday showed. The land is currently pledged to a bank for a loan facility of RM21 million, with an outstanding loan of RM17.87 million as of end-June this year.

Under a share subscription agreement inked, CNH Group will invest RM1.8 million to take up a 45% stake in Johan Panglima by subscribing for 1.8 million new Johan Panglima shares, while Resintech will put in RM200,000 for another 200,000 shares that will give Resintech a total of 2.2 million shares in Johan Panglima, diluting Resintech's stake to 55%.

The development, expected to be completed within 24 months, is anticipated to start in May 2025, once building plan approval is obtained from Majlis Perbandaran Kuala Langat. The project's development cost is estimated to cost RM22.6 million, which Resintech expects Johan Panglima to fund via internal funds and/or borrowings.

Concurrently, Johan Panglima has entered into a 36-month tenancy agreement with Concepts ATC, a company specialising in the supply of labour and worker accommodations that will rent three blocks of buildings, including 158 hostel units and four retail shops from Johor Panglima. These facilities will serve as worker accommodations and commercial outlets.

The total rental over period is estimated at RM12.09 million. There is also a provision for a further three-year renewal, subject to a mutually agreed rental increment of no more than 10%.

These agreements will strengthen the group's financial performance and further its strategic expansion into property development, the group said in a separate statement.

Resintech's founder and managing director Datuk Dr Teh Kim Poo said the partnership with CNH Group is a strategic step forward for Resintech as the group continues to diversify its business portfolio, as it brings invaluable expertise in property development.

“The tenancy agreement with Concepts ATC is a critical component of the project’s success,” said Teh, who is also the largest shareholder in Resintech with a 53.18% stake in the group.

“By securing a long-term tenant even before construction begins, we are ensuring that Johan Panglima will have a reliable and steady stream of income immediately upon project completion. The rental income will cover the operational costs and strengthen our financial stability in the long term,” he added.  

Resintech's share price closed down 0.5 sen or 0.9% at 58 sen on Monday, bringing the group a market capitalisation of RM114 million.