Tuesday 19 Mar 2024
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KUALA LUMPUR (March 22): Hap Seng Consolidated Bhd on Wednesday (March 22) announced its proposal to dispose of its entire stake in HS Credit (Manchester) Ltd (HCML) for £152.96 million, or approximately RM837.34 million.

In a filing with Bursa Malaysia, Hap Seng said that HSC Manchester Holding Pte Ltd, its indirect wholly-owned subsidiary, had entered into a share sale agreement with Lei Shing Hong Capital Ltd (LSHCL) for the proposed disposal.

LSHCL’s ultimate shareholder is Tan Sri Lau Cho Kun, who is the largest shareholder of Hap Seng.

Based on Hap Seng's audited consolidated financial statements for FY2021, the proposed disposal is expected to give rise to a proforma gain of RM558.43 million, said the group in the Bursa filing.

HCML was incorporated in England and Wales on March 5, 2018 and is principally involved in the provision of term loans to corporations in the United Kingdom. HCML is a wholly-owned subsidiary of HSC Manchester.

According to Hap Seng, the sale consideration was arrived at on a “willing-buyer willing-seller” basis after taking into consideration the audited net assets of HCML of £50.99 million for the financial year ended Dec 31, 2022 (FY2022).

The consideration was also arrived at after considering the audited profit after tax of HCML of £986,000 (equivalent to RM5.27 million) for FY2022, stated Hap Seng in the Bursa filing.

The consideration translates into an implied price-to-book ratio (PBR) of three times based on the audited financial statements of HCML as at Dec 31, 2022. According to Hap Seng, the consideration is above the average PBR of comparable companies.

The total borrowings of Hap Seng Group as at Dec 31, 2022 were approximately RM7.07 billion. The group intends to utilise part of the proceeds from the proposed disposal to pare down RM650 million of its existing borrowings.

This is expected to result in interest savings of approximately RM29.25 million per annum, based on the interest rate of approximately 4.5% per annum.

Hap Seng also intends to utilise RM186.44 million from the proceeds to meet its working capital requirements, such as purchasing fertilizers, automobiles and building materials such as steel bars and cements.

Hap Seng closed at RM5.19 on March 22, giving the group a market capitalisation of RM12.92 billion. Year-to-date, the counter had lost 18.91% from the closing price of RM6.40 on January 3.

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