KUALA LUMPUR (Apr 24): Teo Seng Capital Bhd's wholly-owned subsidiary Premium Egg Products Pte Ltd (PEPP) is acquiring entire interest in loss-making BH Fresh Food Pte Ltd (BHFF) for S$9.8 million (RM26.4 million) cash, which owns a factory with cold, freezer and chiller rooms in Singapore.

In a filing with Bursa Malaysia today, Teo Seng (fundamental: 1.9; valuation: 2.1) said Singapore-based BHFF is involved in production, processing, preserving and wholesaling of meat and meat-related products. It currently uses the Singapore factory as a central kitchen to produce ready-to-eat products for hotel and restaurants as well as retailing in its Mmmm! chain of specialty shops.

PEPP today signed a conditional sale and purchase agreement with Oceantrade Foods Pte Ltd (57.86%) and three Singaporeans – Loi Teck Heng (33.57%), Low Sook Cheng (1.43%) and Lee Yee Gee (7.14%) – (collectively known as vendors) to acquire their respective interest in BHFF.

PEPP also signed a conditional agreement with the vendors to dispose of the business and certain assets of BHFF, on an “as is where is” basis, to L M Meat Pte Ltd for S$1.8 million (RM4.85 million) cash.

Teo Seng said the proposed acquisition and disposal are inter-conditional upon each other and shall be completed concurrently. The proposals are expected to be completed during the financial year ending Dec 31, 2015.

"The proposals essentially involve the acquisition by Teo Seng Group, via PEPP, of the property to further expand its business operations in Singapore," said Teo Seng.

It added that the purchase of BHFF will be partly set-off against the proceeds from the proposed disposal. The balance will be funded via internal funds and/or bank borrowings.

Teo Seng said the proposals are in line with the group’s plan to expand its marketing network and customer base overseas. It has been operating in the Singapore market for 10 years.

"The proposals enable the group to expand its business operations by acquiring the property as a distribution centre to cater for the increasing demand for Teo Seng Group’s products in Singapore. It is the intention of the group to focus on its core business in Singapore which is trading or distributing of fresh shell eggs," it added.

For the financial year ended Dec 31, 2014, BHFF recorded a net loss of S$54,000 (RM1.45 million) with an unaudited net assets of S$70,000 (RM1.89 million).

Teo Seng shares closed 1.5% lower at RM1.97 today, giving it a market capitalisation of RM591 million.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)