Ge-Shen inks fresh RM35.5 mil industrial property deal in Johor consolidation

PETALING JAYA (July 8): Ge-Shen Corp Bhd is proceeding with the disposal of five freehold industrial properties in Mukim Tebrau, Johor Bahru, for RM35.5 million cash after entering into a fresh sale and purchase agreement (SPA) with Plastico Sdn Bhd, following the mutual termination of an earlier agreement after the purchaser failed to secure financing within the completion period.

The company said, in a Bursa Malaysia filing yesterday that its wholly owned subsidiary Ge-Shen Plastic (M) Sdn Bhd (GSP) had entered into the new SPA with Plastico on the same day (July 7) for the sale of the properties on an “as is where is” basis.

Asset profile and property specifications

It said in a Bursa Malaysia filing that the disposal involves five parcels of freehold industrial land held under various titles in Taman Gembira, Johor Bahru, used for office, warehouse and factory operations. The properties, located along Jalan Riang 21 and Jalan Riang 23, have land areas ranging from 29,439 sq ft to 52,287 sq ft, with built-up areas ranging from 21,342 sq ft to 50,830 sq ft. The buildings are between 26 and 32 years old and have 100% occupancy.

The properties are subject to charges in favour of Public Bank Bhd, Alliance Bank Malaysia Bhd and United Overseas Bank (Malaysia) Bhd. One of the titles carries a restriction in interest requiring infrastructure for public facilities in the factory area to have commenced construction according to approved plans before transfer is allowed.

Fresh SPA after earlier termination

The latest SPA replaces an earlier agreement signed on Aug 4, 2025 between GSP and Plastico for a RM35 million disposal. That agreement was mutually terminated on Dec 16, 2025 after Plastico failed to secure financing from a financial institution to settle the purchase consideration within the completion period.

Ge-Shen said Plastico has since confirmed that financing has been secured to fund the acquisition. After considering the purchaser’s funding readiness, continued interest in the properties and the rationale for the disposal, the board decided it was in the group’s best interest to enter into the new SPA.

Price below valuation, with disposal gain expected

The RM35.5 million disposal consideration was arrived at on a willing-buyer, willing-seller basis. The price was compared against an independent valuation by Irhamy Valuers International Sdn Bhd, which assessed the properties at RM38.28 million as at Nov 22, 2023 using the comparison approach.

The agreed consideration represents a 7.26% discount to the valuation. Based on the audited net book values as at Dec 31, 2025, the properties had a combined carrying value of about RM20.43 million, with GE-Shen estimating a pro forma net gain on disposal of RM12.63 million.

Monetisation and operational streamlining

Ge-Shen said the disposal would allow the group to monetise its investment in the properties, improve its financial position and streamline operations.

Of the RM35.5 million proceeds, about RM25.698 million will be used to repay bank borrowings secured against the properties. The company said the disposal is expected to contribute positively to future cash flow when realised, while repayment of borrowings will enable the group to lower its gearing ratio.

Ge-Shen also said the disposal supports operational streamlining, as GSP has relocated its operations to an existing plant in the northern region. The company said the relocation places operations closer to the majority of its customers, thereby allowing the group to optimise logistics and reduce transportation costs.

The disposal is not expected to result in GE-Shen becoming a cash company or a Practice Note 17 (PN17) company, and the company does not expect the transaction to adversely or significantly affect operations.

Use of proceeds

Ge-Shen intends to allocate the RM35.5 million proceeds as follows:

1) RM25.698 million for repayment of bank borrowings

2) RM7.239 million for working capital, including operating overheads and staff costs for the injection moulding and assembly segment

3) RM2.563 million for expenses related to the disposal

The disposal-related expenses include fees payable to relevant authorities and legal costs.

Financial impact

Based on an illustrative pro forma scenario assuming the disposal had taken effect on Jan 1, 2025, Ge-Shen said profit attributable to owners of the company would increase from RM20 million to RM30.067 million after accounting for the estimated net gain from the disposal and related expenses. Basic earnings per share would increase from 4.95 sen to 7.23 sen under the same illustrative scenario.

The transaction would also reduce the group’s gearing ratio from 0.71 times after subsequent events to 0.56 times after the disposal, following repayment of borrowings. The disposal does not affect the company’s share capital or substantial shareholders’ shareholdings. No shareholder or regulatory approvals are required, and no directors, major shareholders or connected persons have any interest in the transaction.

Completion is expected in the fourth quarter of 2026.

Strategic rationale and market implications

The disposal is primarily a balance-sheet and operational restructuring exercise rather than a standalone property expansion move. Ge-Shen is monetising a group of fully occupied industrial properties in Johor Bahru, using the proceeds mainly to reduce borrowings while consolidating manufacturing activities at another facility. The re-entry into the SPA after the earlier agreement was terminated also highlights how financing availability can influence the timing and execution of industrial asset disposals.

..........

Read about emerging trends, data-backed insights, growing subsectors, and expert commentaries in EdgeProp print. Subscribe now for your free copy!