Magna Prima Berhad Provides Key Updates on Joint Venture and Sale of Shah Alam Land

Background and Evolution of the Deal

Magna Prima Berhad (“Magna”) has released comprehensive details regarding its joint venture (JV) agreement involving its indirect wholly-owned subsidiary, Magna Ecocity Sdn Bhd (MESB), OCR Avenue Sdn Bhd (OCR Avenue), and Twinicon (M) Sdn Bhd (Twinicon). This follows queries from Bursa Malaysia and investor focus on the proposed disposal of a key land parcel in Shah Alam.

Key Points and Critical Developments

• JV Agreement Origins: The JV with OCR Avenue was established in April 2022, with the intent to develop a 20-acre land parcel, Lot PT 12, Shah Alam. MESB was to receive a minimum of RM160 million under the agreement, with RM80 million due within six months and the balance within three years. The deal aimed to relieve MESB’s financial constraints and mitigate going concern issues flagged by auditors.
• Land Development Phases: OCR Avenue planned to develop the land in three phases:
  • Parcel 1: ~10.00 acres (OCR Avenue)
  • Parcel 2: ~3.81 acres (OCR Avenue)
  • Parcel 3: ~4.58 acres (Twinicon, post-sale; now known as “Sale Land”)
• Implementation Progress: OCR Avenue was granted a Power of Attorney to sell or develop the land. Twinicon, acting as a bona fide purchaser, is entering into a sale and purchase agreement for the Sale Land.
• Financial Stability Restored: The successful JV implementation and associated cash flows have resolved the material uncertainty to Magna’s going concern position, as reflected in the 2023 audited accounts.

Current Status of the JV and Development Project

• JV Agreement Still Active: The JV remains in force, with all conditions precedent fulfilled as of 20 December 2022 after mutual waiver of a key clause.
• Project Details (Parcel 3/Sale Land):
  • Potential: 987 units of service apartments
  • Total Development Cost: RM349.2 million
  • Gross Development Value: RM425.9 million
  • Estimated Start: Q2 2027; Completion: Q1 2030
  • Current Stage: Planning and Development Concept
  • Funding: Internal funds and bank loans
  • Development Approvals: Not yet obtained
• Costs Incurred to Date:
  • MESB: RM2.0 million
  • OCR Avenue: RM25.3 million
• Reason for Land Vacancy: Delays in finalizing development plans and rezoning applications for industrial use caused postponements. OCR Avenue has opted to proceed with commercial property development instead.

Sale Land Transaction Details

• Land Information: 99-year lease expiring 27 September 2083; classified as inventory at RM23.0 million as of 31 Dec 2024.
• Purchase Price: RM225.56 per square foot (total RM45 million), representing a 22.8% increase from the previous RM183.65 psf valuation. An updated formal valuation report is being finalized.
• Board’s View: The Board considers the price fair and in the best interests of the Group, supported by an indicative valuation from a licensed valuer.

Sale and Purchase Agreement (SPA) Key Clauses

• No Conditions Precedent: The SPA dated 24 March 2026 does not include conditions precedent.
• Termination & Penalties:
  • If the Purchaser defaults: Vendor may seek specific performance or terminate and forfeit the deposit as liquidated damages. Refund of remaining purchase price (if any) is subject to the return of vacant possession and documentation.
  • If the Vendor defaults: Purchaser may seek specific performance or terminate and receive a refund of all sums paid plus 10% of the purchase price as liquidated damages, subject to the return of vacant possession and documents.

Financial Impact and Funding Risks

• Gearing Impact (Assuming Full Bank Borrowing):
  • Before Acquisition: 0.025%
  • After Acquisition: 14.34%
• Funding Assurance: Magna and Twinicon have received verbal assurances from their panel banks for the required financing. Should there be any shortfall, internal funds are sufficient to cover the balance.

Investor Implications and Price-Sensitive Information

• The resolution of the going concern issue and restoration of financial stability is a material positive for investors, potentially impacting share value positively.
• The increase in land valuation and fair pricing for the Sale Land could enhance asset values and future earnings.
• The significant rise in gearing post-acquisition denotes increased financial leverage, which investors should monitor closely, especially in the context of project timelines and market conditions.
• Delays in project commencement and the need for development approvals remain key risks.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should perform their own due diligence and consult professional advisors before making investment decisions. The information is based on public company disclosures as of 27 March 2026 and may be subject to change.

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