KUALA LUMPUR (March 31): Loss-making Compugates Holdings Bhd has proposed to diversify into property development and agarwood plantation business to grow its business operations and reduce reliance on its trading and services segment, its major revenue contributor.

On the diversification into property development, Compugates said its 70%-owned subsidiary Compugates Development and Mining Sdn Bhd inked a joint venture agreement with Jade Classic Sdn Bhd in November 2017 to develop a 62-acre piece of land in Selangor.

“Jade Classic will act as the developer to undertake the overall development, construction and completion of the JVA development,” the company said, adding that CDM will be entitled to a share of the project’s total RM585 million gross development value (GDV).

As at March 28, the development is in the earthworks stage and is 65% complete.

It expects Phase 1 of development — which carries GDV of RM230 million — to commence sales in the second half of 2023.

“Pursuant thereto, the group anticipates that the Phase 1 GDV entitlement of approximately RM46 million and/or future share of GDV to be received from the development may contribute 25% or more to the net profits of the group,” it said.

Meanwhile, touching on its planned move into the agarwood plantation business, Compugates said it inked a collaboration agreement with Mega Agarwood Trading (M) Sdn Bhd, Loh Kim Yong and Yeo Tien Kiong to collaborate on the operation of its 54-acre agarwood plantation.

It noted that the collaboration scheme will entitle Compugates to 70% of the agarwood plantation operation’s profit before tax (PBT).

Barring any unforeseen circumstances and subject to requisite approvals, from its shareholders and any other relevant authority, the proposed diversifications are expected to be implemented in the second quarter of 2023.

UOB Kay Hian Securities (M) Sdn Bhd has been appointed as the adviser for the exercise.

Compugates has been in the red for the past seven consecutive financial years.

For the financial year ended Dec 31, 2022 (FY2022), the company posted a net loss of RM7.58 million compared with RM6.97 million in FY2021, RM7.65 million in FY2020, RM8.22 million in FY2019, RM5.99 million in FY2018, RM6.64 million in FY2017 and RM6.22 million in FY2016.

Shares in Compugates finished unchanged at one sen, giving the company a market capitalisation of RM55 million.