by TMR / pic credit: Tatt Giap Group Berhad
TATT Giap Group Bhd is to rent out its Penang-based property to MGudang Sdn Bhd for RM350,000 a month for two years to raise capital for its private vehicle, while improving the group’s gearing.
In an exchange filing on Monday, the steel manufacturer noted its wholly owned unit, Dynaciate SPI Sdn Bhd, has entered into a conditional tenancy agreement with the tenant for the demised property sitting on 550,000 sq ft of land.
Located in Seberang Perai Selatan on Penang island, the property is currently vacant and comprises a two-storey office building, single-storey detached factory and a standalone building.
Under the agreement, the tenant will pay Dynaciate SPI a monthly rental of RM350,000 over a two-year period with the option to renew for an additional year.
Tatt Giap added that the rental income can be utilised by Dynaciate SPI as working capital and/or to pare down its borrowings, while benefitting the group itself in terms of its cashflow and reducing gearing ratio.
The demised property in question was initially intended to be developed into a property development project by the group and would largely be funded with cash raised from the RM40.95 million rights issue completed on Jan 3 this year.
In view of the proposed tenancy, the company is now seeking to divert the funds initially earmarked for the proposed project to help repay the group’s borrowings.
Both exercises are subject to shareholders’ approval and the proposed tenancy is expected to begin in the fourth quarter of the fiscal year ending May 31 this year. — TMR