KUALA LUMPUR (April 1): Wong Engineering Corporation Bhd (WEC) is injecting RM15.75 million into its substantial shareholder Ong Yoong Nyock’s company, Broadway Lifestyle Sdn Bhd (BLSB), to facilitate a land deal that would pave its way into real estate development.
In a bourse filing, WEC said it is taking up a 35% stake in BLSB for RM875,000, and is putting another RM14.87 million into the company via a preference share subscription.
Yoong Nyock — who made an unconditional mandatory takeover offer in 2016 — and his son Wei Kuan, each hold a 50% stake in BLSB.
It is worth noting that WEC’s chief executive officer Yong Loy Huat is the brother in-law of Yoong Nyock, who is also founder and managing director of Tiong Lam Logistics Holdings.
The other parties subscribing to shares in BLSB are Har Lern Corporation Bhd and Tan Woon Chay.
Once the corporate exercise is complete, Yoong Nyock will own a 52.7% stake in BLSB, while WEC will own a 35% stake in BLSB.
Meanwhile, Harn Len will have a 10% interest in BLSB, whereas the remaining 2.3% stakes will be held by Tan.
WECB said the main purpose of the share subscription is to facilitate the completion of a land purchase by BLSB in Dengkil.
On Oct 21, 2019, the company had entered into a conditional sale and purchase agreement (SPA) with Permata Realty Sdn Bhd to buy a piece of leasehold industrial land for RM87.82 million.
However, on March 10, the SPA became unconditional as BLSB could not pay the full amount.
As such, BLSB intends to finance the land consideration through a combination of RM70.26 million in bank borrowings and RM7.57 million in cash.
The company is currently in the midst of procuring credit facilities and WEC will not be required to provide any corporate guarantee to BLSB.
Meanwhile, the cash will be raised from the subscription of 2.5 million of the company’s new shares and 22.5 million of its preference shares.
“The board is of the view that the proposed subscription provides an opportune platform for WEC to participate in the development of the subject land and in turn allows WEC to enjoy a share of profit in BLSB moving forward.”
WEC added that the company's participation in the land development through an associate company reduced its business risks exposure.
Upon completion of the SPA, BLSB will become the owner of the land, which is adjacent to three ongoing industrial park developments.
“[They are] the Serenia Industrial Park, with a focus on logistics carrier and e-fulfilment, e-commerce, automotive and other manufacturing industries; the Tanjung Industrial Park with a focus on heavy and high-tech industry as well as KLIA Industry Park with a focus on aerospace, automotive, cargo and high-tech industry.”
According to WECB, BLSB intends to develop industrial factories and warehouses on the site, but said plans were still preliminary at this juncture.
WEC added that while it intends to continue its core business in the precision metal stamped parts and sheet metals, it will also expand its portfolio to include construction and property development.
In a separate filing, WEC said it will be reclassifying its final dividend of 1 sen per ordinary share to an interim dividend payable on May 8, as the Movement Control Order (MCO) made it difficult to fix a date for its annual general meeting.
Shares in WEC closed down 1 sen or 2.6% at 38 sen, valuing it at RM42.29 million.
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