Friday 29 Mar 2024
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KUALA LUMPUR (April 19): Integrated Logistics Bhd (ILB) is selling two of its Hong Kong-based warehousing outfits for HK$137.3 million (RM69.1 million), in line with its aim to divest most of its remaining business operations in China.

This is in view of the increasingly competitive business environment there and projected increase in rental and labour costs, which is expected to result in declining profit margins, said ILB.

In a filing with Bursa Malaysia today, the logistic services provider said its 70%-own indirect subsidiary Integrated Logistics (HK) Ltd (IL HK) had entered into a deed of sale and purchase with Hong Kong's C.J.H Investment Co Ltd (CJH) for the proposed disposals.

The first disposal entails IL HK selling its entire equity interest in ISH Logistics (Shanghai) Ltd (ISH Shanghai) to Natural Creation Ltd for HK$45.5 million cash.

The other disposal involves IL HK selling its entire equity interest in ISH Cargo Services (HK) Co Ltd (ISH Cargo) to Joint Fun Co Ltd for HK$91.8 million. Both Natural Creation and Joint Fun are indirect wholly-owned subsidiaries of CJH.

Based on its audited financial statements for the financial year ended Dec 31, 2015 (FY15), ISH Shanghai recorded a net profit of HK$1.9 million, while its net asset amounted to HK$60.4 million.

In the same period, ISH Cargo recorded a net profit of HK$1.4 million, while its net asset amounted to HK$2.9 million.

ILB plans to utilise HK$119 million or 86.67% of total proceeds to repay borrowings, HK$17.83 million or 12.98% for working capital, and the remaining for expenses related to the said disposals.

"The group expects to realise interest savings of approximately HK$4.2 million per year from such repayment of borrowings, based on the interest rate of such borrowings of 2.39% to 6.41% per year," said ILB.

Subsequent to the disposal, which is estimated to be completed by the third quarter of 2016, ILB's gearing ratio will decline to 0.2 times, from 0.26 times as at FY15.

At the closing bell, ILB shares fell by half a sen or 0.61% to 81 sen today, giving it a market capitalisation of RM172.74 million.

 

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