Classita Holdings Ventures Into Property Investment to Revitalise Business Prospects
Loss-making lingerie manufacturer Classita Holdings Bhd (KL) is taking bold steps to diversify into the property investment business, aiming to capitalise on the growing demand in Malaysia’s real estate market. The company’s diversification strategy follows its recent acquisition of 18 retail shop lots in Kajang for RM17 million, marking a significant shift in its business direction.
This move could signal a turning point for the Perak-based company as it seeks to improve its financial performance and reduce reliance on its struggling core business of undergarment manufacturing.
Strategic Diversification into Property Investment
Classita’s decision to venture into property investment is part of its broader strategy to stabilise its financial health and explore lucrative business avenues. In its bourse filing, the company expressed confidence in the property market’s potential to deliver significant returns.
According to Classita, the diversification into property investment is anticipated to contribute more than 25% of the group’s net profits and assets in the near future. This diversification is a calculated move to align with the evolving market demands while maintaining its existing businesses.
The Kajang Retail Shop Lots: A Strategic Investment
The cornerstone of Classita’s property investment strategy is the acquisition of 18 retail shop lots in Kajang for RM17 million. These shop lots are being developed by Paris Dynasty Land Sdn Bhd and are expected to be completed by the first quarter of 2025.
Classita highlighted the favourable entry price of RM526 per square foot for these shop lots, which falls within the indicative price range of RM450 to RM850 per square foot for similar properties in the area.
The funding for this acquisition will come from a mix of internally generated funds (RM4 million) and proceeds from the company’s RM88.05 million rights issue completed in July 2023.
Why Property Investment?
Classita’s pivot towards property investment stems from the challenges faced by its existing business operations:
- Declining Revenue in Undergarment Manufacturing
The group’s primary business has been underperforming due to shifts in market demand and increased competition, prompting the need for diversification. - Loss-Making Property Development Arm
While Classita already operates in property development and construction, this segment has also struggled, making the acquisition of income-generating properties a logical extension. - High Potential in Kajang’s Property Market
Kajang’s location, coupled with ongoing infrastructure improvements and economic growth, presents a compelling investment opportunity. The completed shop lots are expected to attract steady demand from businesses and retailers.
Challenges and Opportunities
Despite the promising outlook, venturing into property investment is not without its challenges. Classita faces the risk of market volatility and the need for effective management of its property portfolio.
However, the potential for stable rental income, capital appreciation, and diversification of revenue streams offers significant upside. With the Kajang retail shop lots as its initial foray into property investment, Classita is positioning itself to capture value in Malaysia’s dynamic real estate market.
Funding and Financial Outlook
The group’s ability to finance the RM17 million acquisition without over-leveraging showcases a cautious yet optimistic approach. Using internally generated funds for a portion of the payment and proceeds from its recent rights issue reflects financial prudence while leveraging available resources.
Shares of Classita Holdings remained steady at 6.5 sen on Friday, with the company’s market valuation at RM74.41 million.
Looking Ahead: Classita’s Future in Real Estate
Classita’s diversification into property investment marks a strategic pivot aimed at rejuvenating its financial performance. By acquiring high-potential assets like the Kajang shop lots, the company is setting the stage for long-term growth while maintaining its existing business operations.
As the retail shop lots near completion in 2025, stakeholders will be closely monitoring how this venture impacts Classita’s overall profitability and market position. This move could potentially transform Classita into a diversified entity capable of navigating the challenges of a competitive business environment.
