11 July 2012
PJBumi Bhd, a waste management solutions service provider, is proposing to dispose its entire 15.79% stake or 12 million shares in Alam Flora Sdn Bhd to DRB-Hicom Bhd for RM20.4mil cash that support its efforts to reduce bank borrowings and for working capital
PJBumi Bhd, a waste management solutions service provider, is proposing to dispose its entire 15.79% stake or 12 million shares in Alam Flora Sdn Bhd to DRB-Hicom Bhd for RM20.4mil cash that support its efforts to reduce bank borrowings and for working capital.
The share sale agreement was undertaken by PJBumi Waste Management Sdn Bhd and Hicom Holdings Sdn Bhd wholly-owned subsidiaries of PJBumi and DRB-Hicom respectively.
According to PJBumi, based on the original cost of investment of RM12mil, the disposal consideration represented a premium of RM8.4mil or by 70%.
The sale price was negotiated on a willing-buyer and willing-seller basis.
“The proposed disposal is in line with the company’s objective of realising the non-core assets of the group to generate fresh cash flows to reduce bank borrowings and for working capital,” it said in its circular to shareholders yesterday.
From the proceeds of RM20.4mil, PJ Bumi intended to utilise RM6mil for repayment of term loans, another RM6mil for repayment of an amount owing to a director, RM4mil for project financing, RM4.2mil for working capital and RM240,000 to bear the expenses in relation to the proposed disposal.
Furthermore, arising from the concession agreement between Alam Flora and the Government, PJBumi said Alam Flora had the obligations to increase its capital investment where its management had indicated the necessity to propose a capital call of about RM100mil.
“Based on this, PJBWM will need to inject an additional RM15.8mil into Alam Flora to maintain its current equity percentage in Alam Flora or suffer a dilution of stakeholdings there.
“Notwithstanding the possible result of becoming a PN17 company arising from the proposed disposal, the board has decided it is necessary to bite the bullet in view of the tight financial constraint faced by PJBumi,” it said.
Alam Flora signed a concession agreement with the Government for the privatisation of collection and public cleansing management for a period of 22 years on Sept 19, last year.
It in latest quarterly result ended March 31, PJBumi recorded a net loss of RM645,000 compared to a net profit of RM333,000 a year before.
An analyst said DRB-Hicom that currently owns 60.53% in Alam Flora would have better control of the company going forward arising from this proposed acquisition.
“In terms of increase in earnings contribution, it would small as DRB-Hicom earnings is still dominated by its auto sector of about 60% to 70%.
“But, I would not discount the fact that DRB-Hicom is interested to make Alam Flora its wholly-owned subsidiary in the future,” he told StarBiz.
Together the disposal proposal, PJBumi also proposed a capital reduction of its issued and paid-up share capital proposed capital reduction via the cancellation of 50 sen in the existing par value of each ordinary share of RM1 in PJBumi.
“The proposed capital reduction will enable the company to reorganise its balance sheet by reducing the accumulated losses of the company.
“Furthermore, the shares of PJBumi have been traded below its existing par value of RM1 and this has deterred PJBumi from any capital raising to raise fresh funds.
“The lower par value of 50 sen per share is more reflective of the audited net asset position of the PJBumi which amounted to 56 sen as at Dec 31, 2011 and reduces the gap between the traded value and par value,” said PJBumi.
These proposals will be tabled for shareholders approvals at the company’s forthcoming extraordinary general meeting on August 2.