ILB to sell warehousing units for HK$137.3m

KUALA LUMPUR (April 20): Integrated Logistics Bhd (ILB) is selling two of its Hong Kong-based warehousing outfits for HK$137.3 million (RM68.74 million), in line with its aim to divest most of its remaining business operations in China.

This is in view of the increasingly competitive business environment there and projected increase in rental and labour costs, which are expected to result in declining profit margins, said ILB.

In a filing with Bursa Malaysia yesterday, the logistics firm said its 70%-owned indirect subsidiary Integrated Logistics (HK) Ltd (IL HK) had entered into a deed of sale and purchase with Hong Kong’s CJH Investment Co Ltd for the proposed disposals.

The first disposal entails IL HK selling its entire equity interest in ISH Logistics (Shanghai) Ltd (ISH Shanghai) to Natural Creation Ltd for HK$45.5 million cash. The other disposal involves IL HK selling its entire equity interest in ISH Cargo Services (HK) Co Ltd (ISH Cargo) to Joint Fun Co Ltd for HK$91.8 million. Both Natural Creation and Joint Fun are indirect wholly-owned subsidiaries of CJH.

Based on its audited financial statements for the financial year ended Dec 31, 2015 (FY15), ISH Shanghai recorded a net profit of HK$1.9 million, while its net assets amounted to HK$60.4 million. In the same period, ISH Cargo recorded a net profit of HK$1.4 million with net assets amounting to HK$2.9 million.

ILB plans to utilise HK$119 million or 87% of the total proceeds to repay borrowings, HK$17.83 million or 12.98% for working capital, and the remaining for expenses related to the said disposals.

“The group expects to realise interest savings of approximately HK$4.2 million per year from the repayment of borrowings, based on the interest rates of such borrowings of 2.39% to 6.41% per year,” said ILB.

Subsequent to the disposal, which is estimated to be completed by the third quarter of 2016, ILB’s gearing ratio will decline to 0.2 times, from 0.26 times as at FY15.

Do not ask your uncle about the value of your home. Click here at The Edge Reference Price to find out.

This article first appeared in The Edge Financial Daily, on April 20, 2016. Subscribe to The Edge Financial Daily here.