Duty Free International’s Johor Bahru Project Faces Hurdles: Land Registration Delays and Market Risks

Duty Free International Limited is facing questions from the Securities Investors Association (Singapore) regarding its proposed joint venture project in Johor Bahru, Malaysia. The project, a collaboration with Chin Hin Group, involves developing two blocks comprising 1,010 serviced apartment units, 250 affordable homes, 10 retail lots, and multi-storey car parks. Duty Free International’s entitlement is 18% of the total net saleable area, estimated at RM83.57 million.

Chin Hin Group was selected as the partner due to its strong track record, financial capability, and experience in similar projects. However, the revised development concept of two blocks, instead of the original four, is yet to be approved by the Johor State Economic Planning Unit (UPEN Johor). This approval is a condition precedent for the Joint Development Agreement (JDA), and the deadline for fulfilling this condition is June 9, 2025.

A key concern is the delay in land registration. While the land acquisition agreement was signed in 2019, the land title is still pending issuance. This is a critical prerequisite for the project to proceed. While the company expects the registration to be completed by the end of May 2025, any delays could impact the project timeline and potentially trigger penalties under the JDA.

Although Duty Free International will receive a standalone en-bloc tower as its entitlement, Chin Hin Group has full authority over the project’s design, management, and construction. While Duty Free International has input through the Project Management Committee, the level of influence over key decisions remains a question. The company’s primary objective is to sell the units rather than hold them for recurring income. This raises questions about the long-term value and potential return on investment for shareholders.

The company acknowledges key risks associated with the project, including non-fulfillment of conditions precedent, delays in completion, and political, economic, and regulatory risks in Malaysia. While mitigation measures are in place, such as penalties for delays and the option to terminate the JDA, these risks could still significantly impact the project’s success and, consequently, Duty Free International’s financial performance. Shareholders should closely monitor these developments as they could materially affect the company’s share price.

Disclaimer: This article is for informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence and consult with a financial advisor before making any investment decisions.