Friday 29 Mar 2024
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KUALA LUMPUR (April 27): Tan Chong Motor Holdings Bhd (TCM) has proposed to sell off assets of loss-making subsidiary TC Aluminium Castings Sdn Bhd to sister company APM Automotive Holdings Bhd for RM5.701 million cash.

TCM and APM has a common shareholder, namely Tan Chong Consolidated Sdn Bhd (TCC). TCC owns 43.88% of TCM and 37.53% of APM, according to Bloomberg data.

TCM said in a filing with Bursa Malaysia that it will pocket in gains of RM640,000, which will be used for repayment of borrowings.

The filing said TC Aluminium Castings’ parent, TC Manufacturing Holdings Sdn Bhd, which in turn is a wholly-owned subsidiary of TCM, has proposed to enter into a related party transaction with APM Thermal Systems Sdn Bhd, a wholly-owned subsidiary of APM Automotive, to dispose of TC Aluminium Castings’ assets used for the casting, machining, and assembly of aluminium parts and components.

TCM said TC Aluminium Castings is involved in the manufacturing and distribution of automotive products and components, with APM group being a principal customer.

“Due to high operating costs and declining business volume from its customers, TC Aluminium Castings has been incurring losses in its operation. Expansion of business requires additional heavy capital investment for purchase of higher tonnage machinery, in order to meet the new product requirements of potential clients,” said TCM.

“In view of the foregoing factors, TC Aluminium Castings proposes to dispose of the Assets to APM Thermal Systems. The proposed disposal will limit the ongoing operational losses suffered by TCM group’s business and enable the group to better utilise its resources.”

APM Automotive, in its Bursa Malaysia filing, said it could expand its product base and strengthen its overseas venture by buying the aluminium- casting assets. “The prospects for exporting aluminium castings are good, in particular to European and the US markets that have demand for heat dissipation applications. Aluminium castings are also widely used in the oil and gas industry.”

The selling price of RM5.701 million was lower than the original cost of investment of RM7.93 million put in by TC Aluminium between 2009 and 2015. The assets’ book value as at Dec 31, 2015 was RM4.47 million.

As it is a related party transaction, TCM will require its shareholders’ approval at its upcoming annual general meeting. It expects the disposal to be completed by the final quarter of 2016, and the repayment of borrowings from the sale proceeds to be done within three months after completing the sale.

TCM gained three sen upon closing today to settle at RM2.26, valuing it at RM1.47 billion. APM Automotive meanwhile was traded flat at RM3.91, giving it a market capitalisation of RM764.55 million.

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