Advance Synergy’s cash pile to rise after land sale

This article first appeared in The Edge Financial Daily, on May 13, 2019.
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KUALA LUMPUR: Advance Synergy Bhd, a company controlled by businessman Datuk Ahmad Sebi Bakar, is selling a piece of land for RM124 million cash. The price tag is equivalent to 95% of the company’s market capitalisation of RM130 million, based on the stock’s closing at 14 sen last Friday.

The land is being sold to Singapore’s real estate giant Mapletree Investments Pte Ltd.

The divestment of the tract, which is in Pekan Baru Hicom, Shah Alam, will help boost its cash pile to RM265.2 million. Advance Synergy intends to utilise half of the sale proceeds to pare down its borrowings.

Advance Synergy announced in a filing with Bursa Malaysia last Friday that it would allocate RM61.49 million for debt repayment. As at end-2018, the company’s total borrowings amounted to RM143.91 million, of which RM90.45 million was long-term liabilities. On the other side of the balance sheet, the company’s receivables were at RM134.11 million, besides its cash balance of RM141 million.

Its indirect wholly-owned subsidiary AESBI Power Systems Sdn Bhd last Friday entered into a conditional sale and purchase agreement with Symphony Warehouse Sdn Bhd for the proposed disposal, according to the filing.

Symphony Warehouse is a wholly-owned subsidiary of Mapletree Dextra Pte Ltd, which is in turn a unit of Mapletree Investments.

The hotel and resort operator said it expects to record a net gain of RM81.82 million or 8.81 sen per share after the proposed disposal. Its original cost of investment in the land and buildings was RM39.99 million as at June 3, 2003.

“The proposed disposal provides an opportunity for the group to unlock the immediate value of the property at a value higher than the net book value of the property and proceeds from the proposed disposal will strengthen the group’s cash flow position,” it added.

The market value of the property based on the valuation by independent valuer Jones Lang Wootton was RM110 million as at Feb 21, while the latest audited net book value of the property stood at RM31.55 million as at Dec 31, 2018.

Barring any unforeseen circumstances, the proposed disposal is expected to be completed by the fourth quarter of this year.