SYF sells board business to sister firm Mieco for RM58.6mil


MIECO DECORATIVE POLYMER FACED CHIPBOARD.

KUALA LUMPUR: Property developer and furniture maker SYF Resources Bhd plans to divest its particle board and medium-density fibre board business to Mieco Chipboard Bhd for RM58.58mil to improve its overall financial position.

In a filing with Bursa Malaysia, SYF said it had inked a conditional agreement to sell its 100% equity interest in Great Platform Sdn Bhd for RM7.06mil together with the settlement by Mieco of the shareholder’s advances of RM51.53mil owing by Great Platform to SYF.

The proposed disposal is deemed a related party transaction as SYF executive chairman and chief executive officer Datuk Seri Ng Ah Chai has a majority stake (above 51%) in both SYF and Mieco.

The SYF board has appointed FHMH Corporate Advisory Sdn Bhd as the independent adviser to advise the company’s non-interested directors and non-interested shareholders on whether the proposed disposal is fair and reasonable.

Great Platform, which produces and trades particle boards and medium high-density fibre boards, operates two production plants in Negri Sembilan (in Gemas and Simpang Pertang).

In May and June, Great Platform bought three parcels of freehold industrial land measuring 8.68ha in Gerik, Perak, and seven parcels of freehold agricultural land measuring 16.21ha in Jempol, Negri Sembilan (inclusive of buildings and structures on them) for RM29.25mil. 

It made a profit after tax of RM3.0mil on revenue of RM51.15mil for the financial year ended July 31, 2016 (FY16), with borrowings of RM35.16mil, advances from holding company SYF of RM43.92mil and shareholders’ funds of RM5.93mil.

SYF said it would use RM40mil of the RM58.59mil proceeds from the proposed disposal to repay bank borrowings and RM15mil to fund future purchase of land bank for its property development business.

On the rationale for selling Great Platform, SYF said since starting the boards business in 2013, SYF had provided advances to Great Platform of RM51.53mil while the boards segment contributed only a modest profit after tax of RM3mil in FY16.

It said the decision to sell Great Platform was part of SYF’s strategic business rationalisation exercise.

“The company is of the view that the boards business requires a bigger platform, specialised skills and increased management focus than the SYF group can provide it to grow effectively, and wishes to exit this business to focus its resources and capital for allocation to its other core businesses,” it said.

“The sale enables the company to re-strategise its financial and capital resources and will assist the group to improve its overall financial position and liquidity, allowing the board to focus more on its efforts to weather the tough economic climate which is squeezing revenue and earnings.”

The proposed disposal is subject to the approval of SYF shareholders at an EGM to be convened.

SYF said the board expected the proposed disposal to be completed by the fourth quarter of 2017.
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