KUCHING: British American Tobbacco Bhd (BAT) has confirmed the cessation of its factory operations in Malaysia following its latest deal as part of its business restructuring plan.
In a filing to Bursa Malaysia, British American Tobacco Bhd (BAT) said that it has entered into a conditional sale and purchase agreement (SPA) with LGB Properties Sdn Bhd (LGB) through its wholly owned subsidiary, Tobacco Importers and Manufacturers Sdn Bhd (TIM), to dispose two pieces of land in Petaling Jaya as well as buildings erected on it.
AmInvestment Bank Bhd’s research arm (AmInvestment Research) recapped that BAT had announced it would cease all its factory operations in Malaysia by 2H17 and sell the lands on which its facilities are located, including all factory equipment and machinery.
“We understand that the total consideration for the two parcels of land measuring 13.1 acres and nine buildings is RM218 million.
“This is at a 17 per cent discount to the collective market value of RM262.5 million for the land and buildings as appraised by a property consultant using the comparison method.
“The price was arrived at on a willing buyer willing seller basis and after taking into consideration the highest bid received through its public tender exercise, which closed on April 29, 2016,” noted the research house.
However, taking into consideration the property’s net book value of RM59.2 million, deductions for expenses incurred of RM2.2 million and real property gains tax of RM7.8 million, the expected net gain on disposal is RM148.8 million.
“This translates to earnings per share (EPS) of 52.1sen which was below our earlier estimate of RM1.00 per share given the lower actual land value due to its classification as industrial instead of commercial land,” said the research house.
The sale is conditional upon approval by BAT’s shareholders. Additionally, given that BAT’s operations will only be gradually wound down by 2H17, a tenancy agreement between TIM and LGB has also been effected.
TIM is contracted to pay a monthly rental of RM1.1 million for 12 months from the SPA completion date with the possibility of extending for two terms of six months each.
“All in, we are maintaining our earnings forecasts for now as we await the group’s decision on the use of its proceeds. The proceeds may be used to declare additional dividends, capital reduction for BAT or TIM and/or repay its revolving credit facilities.”