KUALA LUMPUR (April 19): Boustead Holdings Bhd is selling a 6.59-acre piece of freehold land on Jalan Cochrane here to Sunway Bhd for RM233.39 million.

In a bourse filing, Boustead said its wholly-owned indirect subsidiary Mutiara Rini Sdn Bhd had signed a sale and purchase agreement with Sunway’s wholly-owned indirect unit Sunway Rahman Putera Sdn Bhd.

According to the group, the land is vacant with residential status, but has commercial potential. It is around 100m from the Cochrane MRT station and about 4km by road to the city centre, while MyTOWN Shopping Centre and IKEA Cheras are also close by.

Boustead noted that it was selling the land at a 6.1% or RM13.4 million premium over its market value of RM220 million. The sale will result in a gain on disposal of RM54.1 million or 2.67 sen per share.

The Lembaga Tabung Angkatan Tentera (LTAT)-controlled conglomerate will be using the proceeds from the sale to pare down its debts, provide some working capital and defray any costs associated with the sale.

Specifically, it will be using RM101 million to repay bank borrowings, which is expected to result in an interest saving from the repayment of bank borrowings at RM4.5 million per annum.

RM112.8 million of the disposal's proceeds will be used to pay for working capital requirements, while RM19.6 million will be used to defray expenses associated with the sale. 

“The proposed disposal also allows BHB Group to strengthen its liquidity and cash flow position by raising total net cash proceeds of approximately RM213.8 million (net of estimated expenses), which will be utilised for repayment of bank borrowings and working capital,” it said.

Following the sale, Boustead said its gearing ratio is expected to decline to 1.36 times, from 1.39 times previously. The group’s borrowings will also decline to RM7.81 billion, from RM7.91 billion as of Dec 31, 2019 (FY19).

Affin Hwang Investment Bank Bhd is the principal adviser for the proposed disposal.

In a separate statement, Boustead Properties’ Chief Operating Officer Eason Phan said the strategic location, easy accessibility, and ready infrastructure in the area allowed the company to monetise the land at a premium based on our initial cost of investment.

“We are confident that the upcoming development by the acquirer will result in substantially increased population in the area, while spurring higher footfall into MyTown.

He added that the proceeds from the asset monetisation will enable Boustead Properties to focus on enhancing the value of our ongoing property development activities.

Phan said the move is also in line with Boustead Holdings Berhad’s Reinventing Boustead strategy to unlock value by reimagining our role as a sustainability-driven property developer.”

He said Sunway’s bid was chosen from a selection of bidders made up of reputable and financially sound developers who could contribute towards further accelerating the growth in the area

Shares in Boustead finished 1.7% or a sen lower at 58 sen, valuing it at RM1.18 billion. It saw 2.15 million shares done.