Tekala directors propose RM513mil asset injection plan

KUALA LUMPUR: The directors of Tekala Corp Bhd are proposing to inject their own property and construction assets worth RM513mil in a share swap deal to revive the loss-making timber company.

“The proposals present an opportunity for the existing shareholders of Tekala to participate in a proposed new core business that is viable and profitable,” the company said in a filing with Bursa Malaysia on Thursday.

Under the proposed deal, a special purpose vehicle, WMG Holdings Bhd, will be set up to acquire the targeted assets from several private companies controlled by Tekala’s main shareholders and company directors.

WMG will then inject its assets into Tekala via a share swap deal. 

The proposed share swap is on a basis of 133 new WMG shares for every 100 existing Tekala shares.

This will result in WMG having 56.3% equity interest of the enlarged Tekala group.

This will trigger a mandatory general offer for the remaining shares in Tekala not owned by WMG.

According to the statement, companies under WMG Holdings have more than 30 years of proven track record in the property development sector, mainly in Kota Kinabalu and Sandakan, Sabah. 

The combined revenue and profit after tax of the group for the latest financial year ended Dec 31, 2014 amounted to RM141mil and RM22.1mil respectively.

Unaudited combined revenue and profit after tax for the nine months ended Sept 30 amounted to RM118.7mil andRM25.1mil.

“The proposals provide an avenue for the shareholders of Tekala to swap their shares in the company with WMG shares and enable them to participate in the future growth of WMG and its proposed subsidiaries,” it said.

In the announcement, Tekala said the group had been focusing on its timber processing business, particularly the manufacturing and export of eco-floor base plywood to Japan, after its vessel chartering business was discontinued in 2013.

“However, business conditions continue to be challenging due mainly to the escalating cost of production as a result of higher raw material costs, as well as high labour costs arising from the implementation of the minimum wages policy,” it said. 

The group has been recording declining revenue and suffering losses for the past five financial years, except for the financial year ended March 31, 2014 due to a one-off gain on disposal of its vessel. 

For the six months ended Sept 30, 2015, the group recorded a 47.2% fall in revenue to RM15.0mil from RM28.4mil in the previous year and posted higher losses of RM7.2mil compared to loss after tax of RM5.8mil in the previous year.

Tekala shares shed half a sen to close at 30.5 sen on Thursday.