Furniture maker ventures into maiden project in Cameron Highlands
Tafi Industries Bhd is diversifying into property development and construction and the first project it will develop is located in Cameron Highlands, Pahang.
The furniture manufacturer said the gross development value (GDV) and gross development cost of the project, comprising townhouses, apartments, and shops is about RM390 million and RM260 million respectively.
It said in a filing with Bursa Malaysia that the project will be undertaken via a conditional joint venture (JV) with E Prompt Sdn Bhd on 13.35-hectares of land.
The loss-making firm said it is moving to new business after taking into consideration the challenges faced by the furniture business, and its lacklustre financial performance.
Tafi said the project in Cameron Highlands served as an entry point for the company to venture into property development.
The board expected the property development and construction businesses to contribute 25 per cent or more to the company’s net profits in the financial year ending December 31, 2021, onwards, it said.
Tafi said the proposed diversification will be spearheaded by its group chief executive officer Datuk Seri Wong Sze Chien and group managing director Datuk Seri Azlan Azmi who, together with Datuk Seri Andrew Lim Eng Guan, emerged as the controlling shareholders of Tafi after acquiring a controlling stake.
The three individuals launched a mandatory takeover offer for all the remaining shares in Tafi that they did not own. This exercise was completed on October 15.
The land in Cameron Highlands is owned by Lake Gardens Sdn Bhd, which has entered into a JV agreement with E Prompt for the development and also allowed the latter to enter into joint development agreements (JDAs) with third parties for the project.
Under the agreement, Tafi will be required to make payments to E Prompt amounting to RM2 million, which includes RM1 million for the advertising permit and developer licence and RM500,000 upon obtaining the planning permission approval.
Tafi said under the JDA, E Prompt shall be entitled to a range of 16 per cent to 25 per cent of the total number of completed units of apartments and townhouses, which are the main component of the development project.
The company said E Prompt will also be entitled to 35 per cent of the completed units of shoplots, while it will be entitled to all the remaining units built on the development land.
Tafi said it will explore the acquisition of landbanks and/or existing property development projects, enter into JV agreements with landowners/project owners/property developers, and bid for new construction contracts.
“While the company will continue with its current businesses in manufacturing of furniture products, the proposed diversification also serves to mitigate the risk of over-dependence on its current manufacturing business via the additional revenue/earnings stream arising from contribution from the property and construction related businesses,” it said.
Source: NST