Cepatwawasan Group Berhad Announces Proposed Disposal of 40% Equity Interest in Cash Horse (M) Sdn. Bhd.

Summary: Cepatwawasan Group Berhad (“the Company”) has disclosed a detailed update regarding its proposed disposal of a 40% equity stake in Cash Horse (M) Sdn. Bhd. (“Cash Horse”), a biomass power generation subsidiary, to Timah Resources Limited (“Timah”), which is a 69.80% owned subsidiary of Cash Nexus (M) Sdn. Bhd., itself a wholly-owned subsidiary of Cepatwawasan. This strategic transaction is positioned as part of the Group’s broader initiatives to unlock value in its renewable energy assets while maintaining majority control.

Key Financial Highlights of Cash Horse

• Revenue & Profitability: Cash Horse’s revenue has remained relatively stable over the past three audited financial years, with RM34.12 million in 2022, RM34.74 million in 2023, and a slight dip to RM31.82 million in 2024. The unaudited figure for 2025 remains consistent at RM31.91 million.
• Profit After Tax (PAT): PAT shows a downward trend from RM5.17 million in 2022 to RM2.33 million in 2024 but rebounded to RM5.47 million (unaudited) in 2025, indicating some recovery.
• Net Assets and Net Tangible Assets (NTA): There was a significant increase in net assets from RM16.58 million in 2023 to RM77.41 million in 2024, attributed mainly to capitalisation of capital expenditure loans from the holding company, enhancing the equity base and reducing liabilities from RM76 million to RM77.41 million before dropping to RM19.19 million in 2025 (unaudited).
• Total Assets: Increased steadily from RM81 million in 2022 to over RM102 million (unaudited) in 2025.

This financial restructuring, specifically the loan capitalisation, is part of the Company’s long-term strategy to reflect the true asset value of Cash Horse on the balance sheet and thereby support a better valuation of the Group’s shares in the market.

Investment Background

The original investments in Cash Horse by Cash Nexus were made in two tranches: RM175,000 for 175,000 shares in December 2009, and a major investment of RM58.5 million for 58.5 million shares in December 2024, highlighting the Company’s ongoing commitment to the biomass power sector.

Valuation and Disposal Consideration

An independent valuation report by Azmi & Co., a registered valuer, valued the biomass power plant assets at RM95.66 million as of February 2025, based on Malaysian Valuation Standards. Key valuation methods included:

• Comparison Approach for Land: Valued at RM3.65 million based on comparable agricultural land sales in the vicinity.
• Depreciated Replacement Cost for Plant, Machinery & Equipment: Valued at RM75.62 million, reflecting asset condition and economic life, including newly installed boiler and turbine under expansion.
• Buildings: Valued at RM16.39 million.

The disposal consideration for the 40% stake was based on an Adjusted Net Tangible Assets (Adjusted NTA) figure of RM79.03 million, derived by adding a revaluation surplus of RM1.62 million to the audited NTA of RM77.41 million. The purchase price was set at RM31.61 million, representing 40% of Adjusted NTA, reflecting a willing-buyer willing-seller basis.

Payment Terms and Strategic Rationale

The disposal consideration is structured as an inter-company loan payable over a 10-year period. This elongated payment timeline is justified by the operational realities of the biomass plant, which is aging and awaiting commissioning of new major components (boiler and turbine) before refurbishment can begin. The Board assessed the payment tenure based on projected payback periods aligned with recent financial performance, aiming for flexibility without profitability guarantees to the purchaser.

Importantly, the Company retains majority control in Cash Horse post-transaction, with an effective interest of 87.92%, ensuring continued influence over operations and strategic direction.

Financial Impact and Gains

The Group stands to realize a pro forma gain of approximately RM0.65 million from the disposal, calculated as the difference between the RM31.61 million disposal consideration and 40% of the audited net assets (~RM30.96 million). While modest, this gain contributes positively to the Group’s financial position.

Strategic Benefits for Shareholders

• Unlocking Value of Renewable Investments: The disposal is part of a broader plan to highlight and realize the intrinsic value of the Group’s renewable energy assets, which have historically not been fully reflected in the Company’s share price.
• Enhanced Liquidity via Timah Shares: The Company’s majority stake in Timah, now holding part of the equity in Cash Horse, offers shareholders a pathway to divest minority interests in an ASX-listed entity, improving liquidity options compared to direct holdings in unlisted entities.
• Long-Term Growth Focus: The Board remains committed to investing in renewable energy, which is expected to be a significant driver of future growth, and seeks to communicate this value clearly to investors for better market recognition.

Transaction Structure and Conditions

The transaction is governed by a Share Sale Agreement (SSA) with key conditions precedent including shareholder and board approvals. Completion requires simultaneous execution of share transfer documents and issuance of new share certificates. The SSA also contains termination clauses allowing either party to terminate upon material breaches or insolvency, with provisions for refunds and preservation of rights.

Notably, the disposal does not result in any residual liabilities or contingent liabilities for the Company. All operational assets and liabilities remain with Cash Horse, maintaining a clean equity transfer.

Potential Share Price Implications

This disposal announcement is material and price-sensitive for several reasons:

• The restructuring and valuation adjustments provide transparency and visibility to investors on the fair value of the Group’s renewable assets, potentially correcting undervaluation in the market.
• The disposal consideration and payment terms, while long-dated, reflect operational realities and safeguard the Group’s liquidity and cash flow.
• The strategic use of Timah as a vehicle for minority stake disposals enhances the Group’s flexibility in managing its renewable portfolio and could positively influence investor perception and share liquidity.

Investors should, however, monitor the operational performance of Cash Horse as the plant undergoes refurbishment and commissioning of new equipment, which will be critical to sustaining profitability and justifying the long-term asset valuation.

Disclaimer:

This article is for informational purposes only and does not constitute financial advice or a recommendation to buy or sell securities. Investors should conduct their own due diligence and consult with a licensed financial advisor before making investment decisions. The information contained herein is based on data available as of the date of the announcement and may be subject to change.

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