AMDB targets London property (Sept 23, 2009)

KUALA LUMPUR: AMDB Bhd's unit Walleng Enterprises Sdn Bhd is targeting property in London for investments after subscribing for 60% of British Virgin Islands-incorporated Westlink Global Investments Ltd.

Walleng had on Sept 23 subscribed for 60 shares of £1 each in Westlink, or 60% at par cash. After the subscription, Walleng had committed to provide shareholders advances of up to £13.5 million (RM80 million) to Westlink.

AMDB said Westlink had entered into a sale and purchase agreement with LS Victoria PROPERTIES Ltd to purchase two freehold office buildings in Paddington, London for £50.5 million.

"The property provides a net lettable space of 146,000 sq ft of retail and office accommodation, which are currently let to a variety of tenants with approximately 94% occupancy. Based on current rentals from the tenants, the net rental yield on the property is approximately 8.65%," it added.

Due to the contraction of the global economy, AMDB said the subscription in Westlink was a timely opportunity for it to enhance shareholders’ long-term value by penetrating and gaining access to the London property market in London.

AMDB said property values had dropped significantly and based on fundamentals, it is now the right time to invest in the London property market, which is Europe’s largest and offers prime properties in a highly liquid market.

"The outlook at a macro level for the UK economy in the medium term is very robust. These factors together with other London commercial real estate structural elements, for example, five-yearly upwards-only rent reviews, generate a positive outlook for commercial property capital growth and presents an opportunity to make superior risk adjusted returns," it said.

AMDB said the shareholder’s advance would be from its own funds and the group's bank borrowings.

It added that the corporate exercise was expected to contribute positively to AMDB's future earnings from the rental income of the property and any subsequent gain on appreciation or disposal.

Arising from the utilisation of available facilities for the shareholder’s advance, AMDB group’s gearing (net of cash and cash equivalents) will increase from 0.18 times to 0.39 times if fully disbursed. Walleng, whose core activities are property development and investment, has a paid-up is RM2.86 million.

In a separate statement, AMDB's unit was selling its 35% stake in AM SGB Sdn Bhd to SGB-SMIT International GmbH, comprising of 15.19 million shares for cash consideration of RM31.25 million.

After the disposal, AMDB's unit AMDB Technics Sdn Bhd would cease to be a shareholder of AM SGB. AM SGB's core activities are manufacturing and repairing of distribution transformers, cast resin transformers and power transformers for local markets and export.

The group is expected to record a gain on disposal of approximately RM9.7 million from the Proposed Disposal based on the carrying value of RM21.5 million as at Aug 31, 2009.