Halex’s plan to diversify into property business hits a snag

From left: Halex Holdings Bhd chairman Tan Sri Abdul Rahman Abdul Hamid, Federal Land Development Authority (Felda) group Tan Sri Mohd Isa Abdul Samad and Koperasi Majlis Belia Felda Malaysia Bhd (MBFM) president Anuar Abdul Manap at the signing ceremony between Halex and MBFM for the supply of pre-packaged rice.

KUALA LUMPUR: Agro-chemical producer Halex Holdings Bhd’s plan to diversify into property development, aimed at strengthening its financial position, has hit a snag with the termination of an agreement to acquire 75% equity interest in a company with an ongoing property project in Sabah.

The loss-making company told Bursa Malaysia that it and the vendor, Bestempire Ltd, had mutually agreed to terminate the share acquisition agreement (SAA) signed early last year.

The conditions precedent stipulated in the SAA had not been fulfilled within the agreed timeframe, Halex said. There had been several time extensions.

To recap, in March last year Halex’s unit Halex Realty Sdn Bhd signed a conditional agreement to acquire from Bestempire the remaining 75% interest in Kensington Development Sdn Bhd (KDSB) that it did not own for RM21mil.

KDSB owns 16.7 acres of land in Kota Kinabalu, Sabah, which is in the process of being developed into residental and commercial units with an estimated gross development value of RM724mil.

The development costs of the project were expected to be financed via a combination of the Halex group’s internally generated funds and/or bank borrowings.

Based on the purchase consideration, the proposed acquisition would have resulted in a diversion of more than 25% of the net assets of the Halex Group. Further, the project to be developed was forecast to garner a gross development profit of RM264.7mil. As such, if the proposed purchase had materialised, it would contribute more than 25% of the net profits of the Halex Group in the medium term.

For the 15-month period ended Dec 31, 2015, the Halex group posted an after-tax loss of RM1.06mil mainly due to adverse weather affecting fertiliser offtake coupled with the declining oil prices.

Up to June 30 this year, the group remained in the red, with a net loss of RM467,000.