FMH to benefit from MIDA tax incentives
05 Aug 2021
Freight Management Holdings Bhd’s (FMH) plans to acquire 9.3 acres (3.76ha) of vacant freehold land for RM56.8 million, likely to build an integrated logistics hub which will benefit the group from tax incentives granted by the Malaysian Investment Development Authority (Mida).
CGS-CIMB Securities Sdn Bhd analyst Walter Aw said the purchase by FMH is likely to place a large-scale integrated logistics hub which will include e-commerce fulfilment and parcel delivery services.
“This will allow FMH to expand its third-party logistics warehousing and distribution services as it is witnessing strong demand with current utilisation rate at 90% to 95% for its existing warehouses.
“We estimate FMH will likely incur total capital expenditure (capex) of RM130 million to RM150 million for this project inclusive of land cost of RM56.8 million across a two to three-year period,” he said in a note yesterday.
He added that as FMH has net gearing of 0.15x by the end of the third quarter of 2021 (3Q21), it is likely to fund this project with borrowings and internally generated funds.
“FMH previously announced that Mida has granted it tax incentives which is 60% of total capex to be offset against 70% of statutory taxable income.
“This is on the condition of capital expenditure spending of up to RM245 million across five years to become an integrated logistics service provider,” he said.
The broker is yet to factor the impact of this new integrated logistics hub into the financial year 2021 (FY21) to FY23 estimates.
“Our tax rate and capex estimates for FY21 to FY23F stand at 25% and RM15 million respectively,” he said.
FMH announced its proposal to acquire two parcels of land of contiguous vacant freehold industrial land at Kapar, Klang, tagged at RM140 per sq ft in a filing with Bursa Malaysia on Tuesday.
The ultimate holding company of the vendor is Boustead Properties Bhd, and the sales and purchase agreement is conditional upon approval from Malaysia’s Economic Planning Unit.
Aw said the purchase consideration is based on the market value appraised by an independent valuer.
According to the certification of valuation dated July 12, the total value of the parcels stood at RM56.9 million, which is on par with the purchase consideration.
“According to FMH, the purchase consideration for the parcels is reasonable and reflects the current price of similar land nearby,” he said.
The land is also strategically located with connectivity to various highways and Port Klang.
Source: The Malaysian Reserve