Sarawak Cable to raise RM72mil from sale of assets, private placement

  • Corporate News
  • Monday, 21 Oct 2019

Wholly owned subsidiary Leader Cable Industry Bhd (LCIB) is selling a parcel of freehold land together with industrial premises to Maxter Glove Manufacturing Sdn Bhd, a wholly owned subsidiary of Supermax Corp Bhd, for RM65mil cash.

KUCHING: Debt-laden Sarawak Cable Bhd is set to raise up to RM72.3mil from the disposal of assets and a private placement exercise to meet the group’s working capital requirements.

Wholly owned subsidiary Leader Cable Industry Bhd (LCIB) is selling a parcel of freehold land together with industrial premises to Maxter Glove Manufacturing Sdn Bhd, a wholly owned subsidiary of Supermax Corp Bhd, for RM65mil cash.

The industrial premises comprise a single-storey detached factory attached with a four-storey extra high voltage tower, a three-storey detached office building, a canteen and other ancillary buildings such as Tenaga Nasional Bhd substations and a workshop.

Sarawak Cable obtained the approval of its shareholders on the proposed disposal during its EGM here on Oct 16. The Sarawak Cable group is expected to make an estimated net gain of RM18.7mil from the disposal, which is expected to be completed by January 2020.

The said property is currently occupied by LCIB, which houses its power cable manufacturing operations.

According to Sarawak Cable chairman Datuk Seri Mahmud Abu Bekir Taib (pic), LCIB’s existing operations at the property would be relocated in stages to the group’s manufacturing plants in Kedah and Johor.

The company expects to incur a cost of RM4.3mil for the relocation exercise, including the removal and re-installation of machinery, as well as retrenchment expenses.

The relocation, he said, would consolidate the group’s manufacturing facilities in order to optimise production efficiency.

To facilitate the relocation and minimise disruptions to LCIB operations, LCIB will continue to occupy the property on a tenanted basis at a monthly rental of RM250,000 for a minimum of six months and maximum of 12 months upon the completion of the property sale.

On the proposed private placement, Sarawak Cable obtained approval from Bursa Malaysia on Oct 8 to go ahead with the fund-raising exercise.

The private placement entails the issuance of up to about 31.71 million new ordinary shares, representing up to 10% of the company’s issued shares.

Based on an indicative price of RM0.248 per placement share, the exercise will raise up to RM7.29mil.

Sarawak Cable said RM60mil from the proceeds of the property disposal and about RM7.2mil from the private placement would be utilised for the working capital requirements of its four business segments - power and telecommunication cables, steel structure fabrication, transmission line construction and power generation.

Mahmud Abu Bekir said the power and telecommunication cable segment had a current order book of RM662.5mil and that it has tendered for the supply of cables of about RM2.3bil in Malaysia.

He said the group expects to participate in the supply of galvanised products and steel structures to the Pan Borneo Highway project, as well as other mega-infrastructure projects such as the Sarawak Second Trunk Road, the upgrading of the Sarawak coastal road, and road and bridge projects under the Regional Corridor Development Authority.

To participate in these projects, he said the group planned to replace some of its aged plant machinery to improve productivity and capacity, as well as to reduce machinery downtime.

On power generation, he said Sarawak Cable’s mini-hydro power plant project in North Sumatra is now 98% completed and is expected to be fully operational in the current quarter.

The project’s completion date has been delayed due to technical and other issues. It was originally slated for completion in late 2015.

In another development, Sarawak Cable said the Corporate Debt Restructuring Committee (CDRC) of Bank Negara had approved its application for assistance to mediate between the company and certain subsidiaries (affected companies) with their respective financiers on Aug 7.

“This is part of the company’s efforts in managing its debt exposure to safeguard the affected companies, whose core businesses are still viable.

“The standstill letter was issued by CDRC to the lenders on Aug 7,2019, ” it added in a filing with Bursa Malaysia last month. As at Dec 31,2018, the Sarawak Cable group’s total borrowings stood at RM575.8mil, with a gearing ratio of 2.4 times.

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