PCCS sells off packaging business for RM8.5mil

NST Tue, Dec 21, 2021 06:39pm - 2 years View Original


KUALA LUMPUR: Major shareholders of PCCS Group Bhd, via CCSB Sdn Bhd, are buying out its non-earnings accretive wholly-owned subsidiary Mega Label (Malaysia) Sdn Bhd (MLMSB) and Mega Label (Penang) Sdn Bhd (MLPSB) for RM8.5 million.

In a statement today, the company said the disposal would result in a one-off gain of RM6.26 million and see PCCS' cash level increase by RM38 million following the completion of the exercise.

This will give PCCS a total cash balance of RM95 million.

MLMSB is part of the label and packaging division of PCCS, which is involved in printing labels and stickers for garments and other products.

MLMSB has a 51 per cent-owned subsidiary - MLPSB, which is also involved in the printing and selling labels and stickers.

The company said these divisions made losses of RM5.33 million and RM9.71 million for its financial year (FY) ended March 31, 2021, and FY20, respectively, and continue to require heavy capital expenditure (capex) for the next few years.

For FY20 and FY21, a total of RM15.48 million has been pumped in as capex for the packaging and labelling business.

It said this buyout is deemed a related party transaction given the interests of Chan Choo Sing, Chan Wee Kiang, Chan Wee Boon, Tan Kwee Kee, Chan Chow Tek, Datuk Chan Chor Ngiak and Chan Chor Ang, who are all interested parties of PCCS.

Chan Choo Sing and Chan Chow Tek are directors of MLMSB and collectively own an indirect stake of 42.56 per cent in PCCS.

Significantly, this disposal will result in the overall borrowings of PCCS Group dropping from RM71.32 million as of March 31, 2021, to RM28.32 million.

The gearing level will more than halve from 0.45x to 0.17x.

PCCS managing director David Chan Wee Kiang said that while the management wants to continue growing the packaging and labelling business, these businesses are not accretive and require further capex.

"This has been eating up into PCCS' profits and cash position for a few years now.

"For the sake of our shareholders, we are therefore hiving off the packaging business for now," he said.

Chan said moving forward, the company looks forward to better profitability for PCCS, anchored by the apparel and newly launched hire purchase business.

"As the company will have some RM90 million in cash following this exercise, we will be on the lookout for acquisitions. We also intend to grow our hire purchase and medical devices business," he added.

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