KUALA LUMPUR (June 20): Food manufacturer Khee San Bhd is disposing of its freehold industrial land and two blocks of building in Selangor, for RM9 million, cash, to pare down its bank borrowings.

In a bourse filing, Khee San said its wholly-owned subsidiary Food Industries Sdn Bhd (KSFI) has entered into a sale and purchase agreement with Apple Talk Sdn Bhd (ATSB) for the disposal of the 9,846 square metres tract, a single-storey factory that has an annexed double-storey office with a mezzanine floor, as well as a single-storey factory with a total built up floor area of 68,280 square feet at Teluk Panglima Garang, Kuala Langat.

It said the original investment cost for the property was RM2.47 million in 1999 and 2000.

“The expected gain from the disposal is approximately RM23,000 (net of tax payable),” KSB said.

It said proceeds from the disposal will be fully used to pare down KSFI’s bank borrowings, which would reduce the group’s borrowings. As at March 31, 2016, the group’s borrowings amounted to RM62.23 million.

“The disposal will not have any significant effect on earnings, earnings per share (EPS) and net asset (NA) per share and gearing of KSB for the financial year ending June 30, 2016,” said Khee San.

The disposal came after Khee San’s management decided in an earlier management review, that it would be beneficial to the group if the wafer manufacturing facilities currently located at the said property were to be consolidated at its Seri Kembangan premises.

It said there would be significant cost savings accrued from operating out of a single centralised manufacturing centre, improved management control and greater flexibility in manpower resource allocations, as opposed to the current arrangement.
 
In addition, the Seri Kembangan premises have sufficient space to accommodate the wafer production lines. Since an interested purchaser has been identified, the Board and management have decided to dispose of the said property, it added.

Barring any unforeseen circumstances, the disposal is expected to be completed in the third quarter of 2016, 90 days from the date of execution of the SPA.

KSB closed 3 sen or 3.38% higher at 77 sen today, for a market capitalisation of RM76.5 million.