Key Highlights

• Disposal of Freehold Industrial Property: BBR Construction Systems (M) Sdn. Bhd., a wholly-owned subsidiary of BBR Holdings (S) Ltd, has entered into a conditional sale and purchase agreement to divest its freehold land and factory building in Senai, Johor, Malaysia.
• Transaction Value: The property is being sold for RM25,300,000 (approximately S\$7,979,620).
• Significant Gain Realised: The disposal is expected to generate a net gain of approximately RM6,044,140 (S\$1,906,322) after deducting estimated transactional expenses and real property gains tax.
• Utilisation of Proceeds: Net proceeds estimated at RM22,100,000 will be used to repay outstanding loans and mortgages on the property and for general working capital purposes.
• Improved Financial Ratios: The transaction will reduce the Group’s liabilities and improve its gearing, potentially strengthening its balance sheet.
• Change in Business Utilisation: The property has been underutilised and was previously leased to a subsidiary. The tenancy will be terminated upon completion of the sale.
• No Impact on Core Businesses: The disposal is not expected to materially affect the Group’s core operations or business segments.

Detailed Transaction Information

• Property Details: The asset consists of a freehold land measuring approximately 15,800 square metres and a factory building located at PTD 72658, Jalan Seelong Jaya 15, Senai, Johor Bahru.
• Valuation Basis: The last external valuation (as of 31 December 2024) valued the property at RM19,000,000. The sale price exceeds this valuation, indicating value realization above book and market values.
• Purchaser: My Semi Precision Sdn. Bhd., an unrelated Malaysian company engaged in metal treatment, machining, and manufacturing of threaded products.
• Payment Structure:
  • Initial deposit (Earnest Money): RM506,000
  • Balance Deposit upon SPA execution: RM2,024,000 (split between Purchaser’s and Vendor’s solicitors)
  • Balance Consideration: RM22,770,000, payable within three months from the unconditional date, with a one-month extension at 8% interest per annum if required.
• Conditions Precedent: The sale is conditional on approvals from the Johor State Authority and, if required, BBR Holdings’ shareholders. Under SGX listing rules, shareholder approval is not necessary as the transaction size qualifies as a “discloseable transaction.”
• Completion Timeline: Completion is targeted within three months of receiving required approvals, with a possible one-month extension.

Financial Impact and Price Sensitivity

• Net Asset Value (NAV) Enhancement:
  • NAV per share increases from 38.97 cents to 39.55 cents post-disposal.
• Earnings Per Share (EPS) Improvement:
  • EPS rises from 6.55 cents to 7.19 cents, reflecting the net gain from the transaction.
• Relative Size of the Transaction:
  • Net asset value of property is 4.0% of Group NAV; consideration equals 13.1% of market capitalisation.
  • No profits/losses attributable to the property as it was leased to a Group subsidiary (intercompany transactions eliminated).
• No Director or Controlling Shareholder Interest: None of the directors or controlling shareholders have any direct or indirect interest in the transaction, ensuring independence and transparency.

Strategic Rationale

• Balance Sheet Optimization: By realizing value from a non-core, underutilised asset, the Group will reduce debt, improve gearing, and enhance its financial flexibility for future opportunities.
• Operational Efficiency: The disposal will help the Group avoid ongoing maintenance and compliance costs associated with the property.

Shareholder Considerations and Potential Price Sensitivity

• Positive Financial Impact: The net gain and improvement in NAV and EPS may be viewed positively by investors, potentially supporting the share price.
• De-risking and Focus: The disposal allows management to focus resources on core operations and growth initiatives, possibly enhancing long-term shareholder value.
• Transparency: The transaction process is detailed, with the sale price exceeding latest valuation and book value, and all regulatory and shareholder requirements clearly addressed.
• Discloseable Transaction: While not requiring shareholder approval, the size and financial impact qualify this as a price-sensitive event for public disclosure under SGX rules.

Additional Information

• Inspection of Sale Agreement: The SPA will be available for inspection at the Company’s registered office for three months from the announcement date.
• No New Director Appointments: There are no new directors proposed in connection with this disposal.

Conclusion

This disposal represents a material transaction for BBR Holdings (S) Ltd, providing a significant gain, improving key financial ratios, and enabling management to focus on core business activities. Investors should note the expected positive impact on NAV and EPS, as well as the Group’s strengthened financial position post-transaction. As the transaction exceeds 5% of relevant thresholds but remains below 20%, it is classified as a discloseable, price-sensitive event under SGX rules.

Disclaimer

The above article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. Investors are advised to conduct their own due diligence and consult their financial advisors before making any investment decisions. The financial effects and projections are based on unaudited pro forma figures and may be subject to change.

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