Bromat Holdings’ Major Subsidiary Disposal: Shareholder Approval Needed as Loss Swells—What Retail Investors Must Know

Key Points from the Report

• Bromat Holdings Ltd. (SGX:) has provided updates on its proposed sale of its subsidiary Dining Haus Pte Ltd (DHPL), including responses to queries from the Singapore Exchange (SGX).
• The sale involves a disposal of 60% of DHPL’s shares to Mr. Chia Shu Sian, originally for S\$1,200,000, but now revised to S\$1,000,000 following protracted negotiations and a settlement agreement.
• Dividend and management fee arrangements: All management fees and most dividends have been settled; the remaining unpaid dividends (S\$30,399) have been waived.
• Payment structure: S\$200,000 has already been paid; the remaining S\$800,000 will be paid in three tranches after shareholder approval, and interest will accrue at 6% per annum, compounded daily, if the buyer defaults.
• Shareholder approval is now required, as the transaction has escalated from a “discloseable” to a “major transaction” under SGX Catalist Rules due to the revised loss on disposal.
• Major transaction status: The loss on disposal (S\$223,305) triggered the need for an Extraordinary General Meeting (EGM) to approve the deal.
• Major shareholder, Gazelle Ventures Pte Ltd (GV), with a 54.9% stake, has given an irrevocable undertaking to vote in favor of the disposal.
• Financial impact: The disposal will worsen Bromat’s net tangible assets and increase loss per share.
• No board appointment or service contract will be entered into as a result of this disposal.

What Shareholders Need to Know—Potential Price Sensitive Developments

• Deal Revision and Financial Consequences: The reduction in consideration from S\$1.2 million to S\$1 million has increased the loss on disposal, which now exceeds 10% of Bromat’s consolidated net loss—a key threshold under SGX rules. This escalation makes the disposal a “major transaction,” requiring shareholder approval and potentially signaling significant financial impact to investors.
• Negative Net Asset Value and Earnings Impact: The Group’s net asset value is already negative, and the disposal will further worsen this. After the disposal, NTA per share drops from -1.71 cents to -1.80 cents, and loss per share grows from -0.11 cents to -0.19 cents. Retail investors should note that such changes could reflect worsening fundamentals and may affect share prices.
• EGM Is a Critical Event: The transaction cannot complete until shareholders approve it at an EGM. Major shareholder Gazelle Ventures Pte Ltd (54.9% stake) supports the disposal, making approval highly likely, but minority shareholders may still wish to review the rationale and financial effects carefully.
• Payment Timeline and Risk: The buyer’s payment schedule starts only after shareholder approval, with the first payment deferred beyond the original date. If the buyer defaults, outstanding amounts will accrue 6% interest, compounded daily—a factor that introduces risk and uncertainty to the cash inflow.
• Strategic Rationale: Bromat management accepted the lower price to avoid costly legal battles, operational distraction, and reputational risk. This decision may attract scrutiny on how management balances shareholder interests versus expediency.
• No Change to Board or Management: No new appointments or contracts will result from this disposal, reducing risk of governance disruption.

In-Depth Details for Retail Investors

The proposed disposal of Dining Haus Pte Ltd marks a significant turning point for Bromat Holdings. The original deal was struck for S\$1.2 million, but after negotiations and legal advice, management agreed to a reduced consideration of S\$1 million. The buyer, Mr. Chia Shu Sian, paid S\$200,000 upfront; the remaining S\$800,000 is scheduled in three tranches, the first due after EGM approval, and the last by December 2025. If the buyer defaults, the outstanding balance will be subject to a steep 6% interest rate, compounded daily—an important risk factor for future cash flows.

All management fees and dividends due up to 31 December 2024 have been settled, except for S\$30,399 in dividends, which the company has waived—a detail reflecting Bromat’s willingness to close the deal and move on. Shareholders should consider whether such waivers serve their interests in the long term.

The disposal’s financial impact is negative: Bromat’s net tangible assets per share and loss per share will worsen. The NTA per share attributable to shareholders drops from -1.71 cents to -1.80 cents, and loss per share rises from -0.11 cents to -0.19 cents. Bromat’s already challenged balance sheet will be further pressured—a development that could move the share price, especially given the SGX’s requirement for shareholder approval.

The transaction’s escalation to “major transaction” status under SGX rules is another headline point. The loss on disposal now exceeds 10% of the group’s net loss, prompting the need for an EGM. This is not just a formality: while controlling shareholder Gazelle Ventures Pte Ltd (with 54.9% of shares) has pledged to vote in favor, minority investors should analyze the deal’s long-term implications for value and strategy.

No board appointments or new service contracts will follow this deal, and there is no direct interest held by directors or controlling shareholders aside from their shareholdings. This limits potential conflicts of interest but also signals that the disposal is strictly a financial and strategic move.

The company will soon dispatch a circular to shareholders with full details and the EGM date. Retail investors should monitor SGX announcements for further updates and consider attending or voting on this material transaction.

Conclusion—Will This Move the Share Price?

Yes, this disposal is newsworthy and price-sensitive. The reduction in sale price, the worsening financial metrics, the risk in payment structure, and the need for shareholder approval all combine to create a potentially volatile situation for Bromat Holdings shares. Retail investors should be alert to upcoming EGM details and assess whether management’s rationale for accepting a lower price aligns with their own investment outlook.

Disclaimer

This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. Investors should do their own research and consult with professional advisers before making any investment decisions.

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