LCIB to sell off property for RM65m

Alvin Tang

KUCHING: Sarawak Cable Bhd’s wholly-owned unit, Leader Cable Industry Bhd (LCIB), will dispose of an industrial property in Selangor for RM65 million in cash.

LCIB has entered into a conditional sale and purchase agreement (SPA) with Maxter Glove Manufacturing Sdn Bhd (MGMSB) for the proposed disposal of a parcel of freehold land together with industrial premises, comprising a single-storey detached factory attached with a four-storey extra high voltage tower, a three-storey detached office building, a single-storey canteen and other ancillary buildings erected
thereon (property).

MGMSB is a wholly-owned subsidiary of latex glove maker Supermax Corporation Bhd.  

LCIB acquired the said property for RM31 million on May 15, 2012, and it currently houses the company’s power cables’ manufacturing operations.

“The disposal consideration was arrived at on a willing-buyer willing-seller basis after taking into consideration the offer received from MGMSB to purchase the property at a cash consideration of RM65 million and the market value of the property of RM62 million as appraised by CH Williams Talhar & Wong Sdn Bhd (valuer) via its valuation certificate dated July 17 2019 using the cost approach and income approach as the methods of valuation.

For the power and telecommunications and steel structures fabrication segment, the money would be used to procure raw materials for its manufacturing and steel structures fabrication operations.

“The board is of the opinion that the disposal consideration is justified as it is above the latest audited net book value of the property as at December 31 2018 of approximately RM43.1 million and the current market value of the property of RM62 million as appraised by the valuer,”  Sarawak Cable said in a filing with Bursa Malaysia.  

The proposed disposal, which is subjected to approvals of Sarawak Cable shareholders at an extraordinary general meeting to be convened later or any other relevant authorities, is expected to be completed by first quarter of 2020.  

Sarawak Cable said the proposed disposal was undertaken to strengthen its liquidity and cash flow position by raising cash proceeds mainly for the group’s working capital requirements for its core business segments with growth opportunities.

In addition, Sarawak Cable said the disposal price also represents an attractive premium over the latest audited net book value of the property, which would enhance the group’s earnings with an estimated net gain on disposal of about RM18.7 million.

From the proceeds, RM60 million will be utilised for the group’s working capital requirements within 12 months while the balance RM5 million to pay for the estimated expenses for the disposal. 

The RM60 million will be used for the group to finance its day-to-day operations in its three business segments — power and telecommunication cables and steel structures fabrication, transmission lines construction and power generation.

For the power and telecom-munications and steel structures fabrication segment, the money would be used to procure raw materials for its manufacturing and steel structures fabrication operations.

“The power and telecom-munication cables segment has been the main contributor to the group’s operation profit, and the group anticipates market demand for this segment to improve as it intensifies its efforts to increase its export sales.

“In its steel structures fabrication segment, the group expects to participate in the supply of galvanised products and steel structures to Pan Borneo Highway project and other project initiations by the state of Sarawak comprising the Second Trunk Road, upgrading of coastal road and the proposed roads and bridges under the Regional Corridor Development Authority.” said Sarawak Cable.

For the transmission lines construction segment, the company said part of the proceeds would be used to part finance the working capital required to complete several on-going projects. 

Part of the proceeds will also go to finance the remaining working capital required for the completion of the mini-hydro power plant project in north Sumatra, Indonesia undertaken by the power generation segment.

The dam project, according to Sarawak Cable, is about 96 percent completed, and the 10MW plant is expected to be fully operational by fourth quarter of 2019. The project has been delayed for several years due to various
problems.

The electricity generated by the power plant will be sold to Perusahaan Listrik Negara Persero (PLN) — the Indonesia utility body — for 20 years under a Power Purchase Agreement (PPA) signed earlier. The concession is renewable. 

“Pursuant to the proposed disposal, the existing operations of LCIB at the property will be relocated in stages to the group’s manufacturing plants situated at Kedah and Johor so as to consolidate its manufacturing facilities with the aim to optimise production efficiency.

“LCIB will enter into a tenancy agreement with MGMSB to continue to occupy the property for a tenanted basis at a monthly rental rate of RM250,000 for a minimum tenure of six months and a maximum tenure of 12 months upon delivery of legal possession of the property to facilitate the relocation and minimise disruption to the operations,” it added.

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