CCM plans more non-core asset sales to ease debt burden

by DASHVEENJIT KAUR / pic by HUSSEIN SHAHARUDDIN

Chemical Co of Malaysia Bhd (CCM) intend to reduce its debt further by disposing of two more non-core assets this year.

The group, which has just completed a demerging exercise last year, will dispose 7.2ha of industrial land in Nilai, Negri Sembilan, and a 8.45% interest in PanGen Biotech Inc, a biotechnology company listed on the South Korean stock market.

The land in Nilai is said to have a net book value of RM19.8 million, while the market value of the PanGen Biotech stake was about RM49 million as of February, according to CCM.

Group MD Nik Fazila Nik Mohamed Shihabuddin (picture) said potential buyers for the PanGen stake have been identified and CCM is in negotiation with them, while the Nilai land sale is expected to be concluded in the second half of the year (2H18).

PanGen Biotech is listed on the Korean Securities Dealers Automated Quotations board, equivalent to Bursa Malaysia’s ACE Market.

“At the moment, PanGen Biotech has yet to make any profit or declare any dividend, so we are expecting capital appreciation from that investment.

“We feel that we are no more in the business to wait for dividend payments bearing in mind that it does not give us any synergistic value any more,” Nik Fazila told reporters after the group’s EGM last Friday.

She said CCM targets to reduce its gearing ratio to about 0.7 times by the end of 2018 from 1.51 times at present.

CCM anticipates about RM13 million to RM14 million in interest savings annually from the de-gearing exercise as the group targets to complete the divestment process by 2H18. CCM’s total debt currently stands at RM440 million.

Nik Fazila said the group aims to bring the debt level down to about RM120 million.

CCM obtained shareholders’ approval to dispose of three parcels of leasehold land in Shah Alam, Selangor, for RM190 million cash to Global Vision Logistics Sdn Bhd as part of the group’s degearing plan via the divestment of identified non-core assets.

“This has given ample agility for CCM to pursue its expansion plan and create a sustainable growth for the future.

“The group will now focus on solidifying its leading positions in the chemicals and polymers businesses to accelerate its growth,” Nik Fazila said.

The original cost of investing in the Shah Alam land was RM23.3 million when it was purchased on Sept 9, 1965. The disposal is expected to be completed by June 2, 2018.

Nik Fazila said CCM has allocated RM68.5 million for the reactivation and expansion of its Pasir Gudang Works 1 plant, which is expected to be completed in the second quarter of 2019.

“This will increase production capacity by 50%,” she added.

CCM has allocated RM22 million to acquire new factories to expand its polymers business, which will help increase the segment’s revenue contribution by 10%.

At present, its polymers factories are operating at full capacity and the group has identified new capacity located adjacent to its existing plant.

Nik Fazila said CCM will invest in technology as part of its ongoing effort to increase efficiency and improve the mechanics of chlor alkali production.

“For this year, the focus will be on reducing energy and maintenance cost,” she added.

For its financial year ended Dec 31, 2017, CCM recorded a 25% year-on-year increase in revenue to RM370.7 million, mainly due to improved revenue from its chemicals and polymers businesses.