24/10/2011 (The Star) - Plans are afoot for Johor Corp (JCorp) to inject some property assets into its 58% listed subsidiary Damansara Realty Bhd (DRealty), in a move aimed at unlocking value for both entities, reliable sources said.

The two properties identified to be injected are the Bandar Dato Onn integrated township (located 12km from Johor Baru) and the 1,400ha Tanjung Langsat industrial estate, a sprawling complex that has attracted multi-billion ringgit investments already.

According to sources, the plan is for JCorp to take a combination of cash and shares from DRealty for the sale of these assets.

If the exercise goes through, JCorp will have close to 100% ownership of DRealty but may enter into a second phase of the restructuring.

The Tanjung Langsat industrial complex is being developed to cater for
petrochemical, oil and gas, chemical, biofuel, palm oil and other related
activities.

“There is likely to be a placement out of some of those shares. But more significantly, a second corporate exercise could be in the offing, that would both solve the problem of lowering JCorp's holding in DRealty and at the same creating value for all parties,” said a banking source.

Bandar Dato' Onn is a mixed development carried out by Johor Land Bhd (a company taken private by JCorp in 2009) on land previously known as Ladang Tebrau, with total area of 1,474.25 acres.

Upon completion, Bandar Dato' Onn will comprise more than 18,000 of residential and commercial units.It has been reported that the expected gross sales from this project that is supposed to span 10 to 15 years from its 2008 launch was about RM4bil.

Tanjung Langsat is one of the five designated growth zones within Iskandar Development Region.

The industrial park is being developed by JCorp subsidiary TMP Technopark Sdn Bhd, to cater for petrochemical, oil and gas, chemical, biofuel, palm oil and other related activities.

According to some reports, more than 20 local and foreign companies are operating in the industrial estate with total investments having topped RM10bil, including infrastructure.

Both these assets have a total book value of some RM1.6bil.

Assuming they are injected into DRealty at these prices, JCorp will have close to 100% of DRealty, which only had a market capitalisation of RM206mil at last Friday's close of 82.5 sen per share.

DRealty's shares have been on an uptrend of late, rising from its 52-week low of 39 sen in July, to hit an intra-day high of 83 sen last Friday.

According to those with knowledge of the proposal, DRealty will be issuing new shares to JCorp for the assets but also paying a cash portion of around RM400mil. However, it isn't clear how DRealty is going to raise this funds. DRealty is in the red, having reported a RM1.15mil loss for the six months ended June 30, 2011.

It has only around RM4mil in net cash. One possibility though is for DRealty to raise the funds on the back of the assets being injected into it.

The proposed corporate exercise involving DRealty is part of a group-wide restructuring of JCorp, that is primarily aimed at unlocking values within the group to help it raise funds to settle its debt obligations of RM3.6bil that will mature in the middle of next year.

Recently, JCorp sold RM700mil worth of oil palm estates and mills to its 53% subsidiary, Kulim (M) Bhd. Kulim also privatised its subsidiary Sindora Bhd, a company that has a variety of businesses.