Thursday 28 Mar 2024
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KUALA LUMPUR (Feb 25): Public utilities company Taliworks Corp Bhd is withdrawing its entire investments from China to relieve itself from the need of supporting "substantial" capital expenditure requirements there. The exercise will also see its borrowings halved and gearing levels improved.

Taliworks today signed an agreement with LGB Group (HK) Ltd to dispose of its entire Chinese investments, comprising Taliworks International Ltd, Taliworks (Sichuan) Ltd and SWM Technologies (Malaysia) Sdn Bhd (SWMT) for US$54.6 million (RM230 million) cash.

In a statement today, the group said it is expected to book a one-off gain of RM48.8 million from the disposal, as well as improve its gearing levels to 0.36 times.

It also said the proposed disposal forms part of its new realignment strategy towards developing assets with mature and cash-flow generating utilities or infrastructure assets.

The proceeds from the proposed disposal will be used to partially fund the acquisition of a 35% stake in SWM Environment Holdings Sdn Bhd (SWMH) for RM245 million cash. SWMH provides solid waste collection and public cleansing management services in the states of Negeri Sembilan, Melaka and Johor, under a 22-year concession agreement with the federal government.

"Any remaining proceeds (from the proposed disposal) will be earmarked for future investments (which may include acquisitions of strategic investments and/or strategic collaborations, joint ventures or alliances) and working capital," it said.

Taliworks said it will also use proceeds raised from the 10% private placement of new Taliworks shares that was completed on Oct 23, 2015 and the disposal of its 50% stake in Pinggiran Muhibbah Sdn Bhd to the Employees Provident Fund Board which was completed in December last year, as well as internal funds and/or bank borrowings, to fund the stake acquisition in SWMH.

SWMH manages 4,500 to 5,000 tonnes of waste per day across 27,560 sq km.

"We believe that SWMH will be a valuable addition to the group, as it has a well-established track record of excellent operations. Taliworks’s focus moving forward, continues to be on Malaysia and other developed markets," said Taliworks executive director Lim Yew Boon in the statement.

Barring any unforeseen circumstances and subject to all approvals being obtained, Taliworks expects the two proposals to be completed in the first half of this year.

Meanwhile, Taliworks saw its net profit rise more than 11 times to RM51.25 million for the fourth quarter ended Dec 31, 2015 (4QFY15), from RM4.43 million in 4QFY14, due to a RM59.1 million gain from the stake disposal in Pinggiran Muhibbah.

Revenue declined 12.3% to RM100.19 million, from RM114.22 million a year ago, due to lower contribution from the construction business.

The group also declared a fourth interim dividend of 2 sen per share, amounting to RM24.2 million, for FY15. This brings total dividend pay-out for the year to RM92.13 million.

For the full year, the group's net profit fell to RM86.58 million, from RM301.25 million in FY14, as it was significantly impacted by exceptional items recorded in the two financial years. Revenue, however, rose 16.1% to RM410.93 million, from RM353.91 million.

"In FY14, the group registered a gain on restructuring of RM272.7 million, whereas in FY15, it recorded a gain on disposal of RM59.1 million and RM7.486 million of investment income, which was offset by the impairment loss of intangible asset amounting to RM6.75 million," said Taliworks.

Excluding these exceptional items, the group's pre-tax profit was higher at RM31.7 million, compared to RM30.5 million in the previous year.
 
On prospects and performance, Taliworks expects the Sungai Selangor Water Treatment Works Phase I, which is the main contributor to the group, to continue to run its production above its design capacity of 950 million liters per day, due to continuous increase in demand for treated water in the Klang Valley.

Taliworks shares closed one sen or 0.65% higher at RM1.56 today, bringing it to a market capitalisation of RM1.89 billion.

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