KUALA LUMPUR (Dec 22): Hiap Huat Holdings Bhd intends to sell a unit of factory in Kepong, Selangor to Everise Frozen Foods Sdn Bhd for RM11.76 million cash.

In a filing with Bursa Malaysia today, Hiap Huat said its wholly-owned subsidiary Hiap Huat Chemicals Sdn Bhd had entered into a sale and purchase agreement (SPA) with frozen beef food supplier Everise Frozen for the divestment.

The building, which measures approximately 4,618.67 square metres, comprises a single-storey detached factory, annexed with a three-storey office building and other ancillary buildings, said Hiap Huat.

It is located on a piece of 99-year leasehold land expiring on July 9, 2078. The gross floor area of the office and factory building is 1,746.50 square metres.

The proposed disposal will be completed by the first quarter of 2015, it said, adding that there would be an estimated gain of about RM6.84 million after taking into consideration the audited net book value of the property, current year depreciation charged, estimated real estate commission, real property gains tax and professional fees.

“This would translate into additional earnings per share of 2.05 sen to the Hiap Huat Group for the financial year ending Dec 31, 2015,” said Hiap Huat.

The proceeds are expected to be utilised within 12 months for repayment of bank borrowings, repayment of trade and other creditors, renovation of new premises and estimated expenses in relation to the proposed disposal, it added.

Notably, the market value of the building was RM11 million while its net book value as at Dec 31, 2013 was RM4.45 million, said Hiap Huat, adding that its original cost on the property was RM5.15 million.

The sale consideration of RM11.76 million was arrived at on a willing buyer and willing seller basis between the two parties after taking into consideration the market value of RM11 million as appraised by Knight Frank Malaysia Sdn Bhd.

Currently, the property is used as the corporate office of Hiap Huat and its subsidiaries. “The corporate office of the company will be reallocated to an office premise to be acquired at an on-going development project known as “Sunway Nexis Soho”, as first announced by the company on May 10, 2013.”

Vacant possession of the new office is expected by Jan 5, 2015 and the group expects to move in by Mar 20, 2015, it noted.

“With the new corporate office to be acquired expected to completed by the first quarter of 2015, the group will have a surplus of office space and the proposed disposal represents an opportunity for the group to realise the potential gains arising from investment in the property,” it reasoned.

According to theedgemarkets.com, Hiap Huat’s valuation score is at 2.1 out of 3, with 3 suggesting a company gives higher than market average returns and is trading at a lower than average valuation.

Its fundamental is at 0.45 on a scale of 0-3, with 3 suggesting that it is profitable and has strong balance sheet.

The volatility of the stock is rated at 4 on a scale of 1 to 5, with 1 being the least volatile.

Hiap Huat share price closed unchanged at 12.5 sen today, giving it a market capitalisation of RM40 million.